On January 1, 2XX0, Waterfall Inc. acquired a 10% interest in Junior Corp. On January 1, 2XX1, Waterfall Inc. acquired an additional 20% Junior's common stock. No goodwill resulted from either purchase. Juniorreported net incomes of $650,000 and $520,000 for 2XX0 and 2XX1, respectively. Dividends paid by Junior amounted to $357,500 in 2XX0 and $162,500 in 2020.What amount of Equity Income should be reported by Waterfall Inc. in 2XX1?Select one:OOOa. $123,500b. $107,250c. $156,000d. $71,500

Investment in associates refers to the type of investment that the firm makes in another company…

Answered: On January 1, 2XX0, Waterfall Inc.…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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On January 1, 2021, Alamar Corporation acquired a 36 percent interest in Burks, Inc., for $198,000. On that date, Burks’s balance sheet disclosed net assets with both a fair and book value of $353,000. During 2021, Burks reported net income of $84,000 and declared and paid cash dividends of $24,000. Alamar sold inventory costing $27,000 to Burks during 2021 for $35,000. Burks used all of this merchandise in its operations during 2021. Prepare all of Alamar’s 2021 journal entries to apply the equity method to this investment. 3. Record the investee dividend declaration.
On January 1, 2024, Spark Corporation acquired a 40% interest in Cranston Incorporated for $250,000. On that date, Cranston's balance sheet disclosed net assets of $430,000. During 2024, Cranston reported net income of $100,000 and paid cash dividends of $30,000. Spark sold inventory costing $40,000 to Cranston during 2024 for $50,000. Cranston used all of this merchandise in its operations during 2024. Any excess cost over fair value is attributable to an unamortized trademark with a 20-year remaining life. Prepare all of Spark's journal entries for 2024 to apply the equity method to this investment.
On January 1, 2024, Alamar Corporation acquired a 40 percent interest in Burks, Incorporated, for $210,000. On that date, Burks's balance sheet disclosed net assets with both a fair and book value of $360,000. During 2024, Burks reported net income of $80,000 and declared and paid cash dividends of $25,000. Alamar sold inventory costing $30,000 to Burks during 2024 for $40,000. Burks used all of this merchandise in its operations during 2024. Required: Prepare all of Alamar's 2024 journal entries to apply the equity method to this investment. Record the acquisition of a 40 percent interest in Burks. Record the accrual of 40 percent of the reported earnings of the investee. Record the investee dividend declaration Record the collection of dividend from investee. Record the income on intra-entity sale.
On January 1, 2018, Alamar Corporation acquired a 40 percent interest in Burks, Inc., for $210,000. On that date, Burks’s balance sheet disclosed net assets with both a fair and book value of $360,000. During 2018, Burks reported net income of $80,000 and declared and paid cash dividends of $25,000. Alamar sold inventory costing $30,000 to Burks during 2018 for $40,000. Burks used all of this merchandise in its operations during 2018. Prepare all of Alamar’s 2018 journal entries to apply the equity method to this investment.
Vaughn Incorporated acquired all of the outstanding common stock of Roberts Company on January 1, 2023, for $276,000. Annual amortization of $21,000 resulted from this acquisition. Vaughn reported net income of $80,000 in 2023 and $60,000 in 2024 and paid $24,000 in dividends each year. Roberts reported net income of $50,000 in 2023 and $57,000 in 2024 and paid $12,000 in dividends each year. What is the Investment in Roberts Company balance on Vaughn's books as of December 31, 2024, if the partial equity method has been applied? Multiple Choice $317,000 is Incorrect $326,000 $359,000 $368,000 $383,000 please answer do not image.
On January 1, 2020, Pharoah Corporation purchased 40% of the common shares of Novak Company for $201,000. During the year, Novak earned net income of $77,000 and paid dividends of $19,250.Prepare the entries for Pharoah to record the purchase and any additional entries related to this investment in Novak Company in 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit (To record purchase of stock.) (To record receipt of dividends.) (To record revenue.)
On January 1, 2021, Alamar Corporation acquired a 36 percent interest in Burks, Inc., for $198,000. On that date, Burks’s balance sheet disclosed net assets with both a fair and book value of $353,000. During 2021, Burks reported net income of $84,000 and declared and paid cash dividends of $24,000. Alamar sold inventory costing $27,000 to Burks during 2021 for $35,000. Burks used all of this merchandise in its operations during 2021. Prepare all of Alamar’s 2021 journal entries to apply the equity method to this investment. 4. Record the collection of dividend from investee.
On January 1, 2022, Halstead, Incorporated, purchased 71,000 shares of Sedgwick Company common stock for $1,554,000, giving Halstead 25 percent ownership and the ability to apply significant influence over Sedgwick. Any excess of cost over book value acquired was attributed solely to goodwill. Sedgwick reports net income and dividends as follows. These amounts are assumed to have occurred evenly throughout these years. Dividends are declared and paid in the same period. Year 2022 2023 2024 Net Income $ 375,000 442,000 619,000 Annual Cash Dividends (paid quarterly) $ 112,000 154,000 173,000 On July 1, 2024, Halstead sells 11,360 shares of this investment for $27 per share, thus reducing its interest from 25 to 21 percent, but maintaining its significant influence. Required: Determine the amounts that would appear on Halstead's 2024 Income statement relating to its ownership and partial sale of its Investment in Sedgwick's common stock. Total income accrual (no unearned gains) on sale of…
On January 1, 2019, Halstead, Inc., purchased 83,000 shares of Sedgwick Company common stock for $1,529,000, giving Halstead 25 percent ownership and the ability to apply significant influence over Sedgwick. Any excess of cost over book value acquired was attributed solely to goodwill. Sedgwick reports net income and dividends as follows. These amounts are assumed to have occurred evenly throughout these years. Dividends are declared and paid in the same period. Net Income Annual Cash Dividends (paid quarterly) 2019 $357,000 $124,000 2020 399,000 144,000 2021 601,000 177,000 On July 1, 2021, Halstead sells 13,280 shares of this investment for $23 per share, thus reducing its interest from 25 to 21 percent, but maintaining its significant influence. Determine the amounts that would appear on Halstead’s 2021 income statement relating to its ownership and partial sale of its investment in Sedgwick’s common stock. (Round your intermediate calculations to the…
On January 3, 2023, Sheppard Corporation purchased 15% of Meredith Corporation's common stock for $62,000. Meredith's net income for the years ended December 31, 2023 and 2024 were $18,000 and $56,000 respectively. Meredith declared no dividends during 2023; however, during 2024, the company declared a $70,000 dividend. On December 31, 2023, the fair value of Meredith's stock that Sheppard Corporation owned had increased to $73,000; in 2024, it increased again to $79,000. What will be the carrying value of the investment at the end of December 31, 2024? Group of answer choices $79,000 $135,000 $73,000 $62,000
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Herbert, Inc., acquired all of Rambis Company’s outstanding stock on January 1, 2020, for $649,000 in cash. Annual excess amortization of $19,800 results from this transaction. On the date of the takeover, Herbert reported retained earnings of $410,000, and Rambis reported a $226,000 balance. Herbert reported internal net income of $42,500 in 2020 and $55,400 in 2021 and declared $10,000 in dividends each year. Rambis reported net income of $28,500 in 2020 and $41,400 in 2021 and declared $5,000 in dividends each year. a. Assume that Herbert’s internal net income figures above do not include any income from the subsidiary. If the parent uses the equity method, what is the amount reported as consolidated retained earnings on December 31, 2021? What would be the amount of consolidated retained earnings on December 31, 2021, if the parent had applied either the initial value or partial equity method for internal accounting purposes? b. Under each of the following situations, what is…

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