On January 4, 2021, Snow Co. purchased 40,000 shares (40%) of the common stock of Walker Corp., paying $900,000. There was no goodwill or other cost allocation associated with the investment. Snow has significant influence over Walker. During 2021. Walker reported income of $240,000 and paid dividends of $75,000. On January 2, 2022, Snow sold 5,000 shares for $125,00o. What was the balance in the investment account after the shares had been sold? Multiple Choice $871,500. $845,250. $761,250. $897.250. < Prev 8 of 10 Next >

On January 4, 2021, Snow Co. purchased 40,000 shares (40%) of the common stock of Walker Corp., paying $900,000. There was no goodwill or other cost allocation associated with the investment. Snow has significant influence over Walker. During 2021. Walker reported income of $240,000 and paid dividends of $75,000. On January 2, 2022, Snow sold 5,000 shares for $125,00o. What was the balance in the investment account after the shares had been sold? Multiple Choice $871,500. $845,250. $761,250. $897.250. < Prev 8 of 10 Next >

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Sunland Corporation purchased 370 shares of Sherman Inc. common stock for $ 13,100 ( Sunland does not have significant influence). During the year, Sherman paid a cash dividend of $ 3.00 per share. At year-end, Sherman stock was selling for $ 37.50 per share.Prepare Sunland's journal entries to record (a) the purchase of the investment, (b) the dividends received, and (c) the fair value adjustment. (Assume a zero balance in the Fair Value Adjustment account.) (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.) No. Account Titles and Explanation Debit Credit (a) enter an account title to record the purchase of the investment enter a debit amount enter a credit amount enter an account title to record the purchase of the investment enter a debit amount enter a credit amount (b) enter an account title to record…
Matthew, Inc., owns 30 percent of the outstanding stock of Lindman Company and has the ability to significantly influence the investee's operations and decision making. On January 1, 2021, the balance in the Investment in Lindman account is $382,000. Amortization of excess fair value associated with the 30% ownership is $10,500 per year. In 2021, Lindman earns an income of $156,000 and declares cash dividends of $39,000. Previously, in 2020, Lindman had sold inventory costing $54, 600 to Matthew for $78,000. Matthew consumed all but 20 percent of this merchandise during 2020 and used the rest during 2021. Lindman sold additional inventory costing $59, 400 to Matthew for $90,000 in 2021. Matthew did not consume 40 percent of these 2021 purchases from Lindman until 2022. What amount of equity method income would Matthew recognize in 2021 from its ownership interest in Lindman? What is the equity method balance in the Investment in Lindman account at the end of 2021?
On January 1, 2021, American Corporation purchased 30% of the outstanding voting shares of Short Supplies common stock for $231,000 cash. On that date, Short's book value and fair value were both $770,000. The equity method is deemed appropriate for this investment. Short's net income reported on December 31, 2021, was $73,000. During 2021, Short also paid cash dividends in the amount of $20,500. Required:Compute the amount that would be reported for the investment on American Corporation's financial statements at December 31, 2021.
Matthew, Inc., owns 30 percent of the outstanding stock of Lindman Company and has the ability to significantly influence the investee’s operations and decision making. On January 1, 2021, the balance in the Investment in Lindman account is $408,000. Amortization of excess fair value associated with the 30% ownership is $9,500 per year. In 2021, Lindman earns an income of $181,500 and declares cash dividends of $60,500. Previously, in 2020, Lindman had sold inventory costing $40,200 to Matthew for $67,000. Matthew consumed all but 30 percent of this merchandise during 2020 and used the rest during 2021. Lindman sold additional inventory costing $44,800 to Matthew for $80,000 in 2021. Matthew did not consume 40 percent of these 2021 purchases from Lindman until 2022. What amount of equity method income would Matthew recognize in 2021 from its ownership interest in Lindman? What is the equity method balance in the Investment in Lindman account at the end of 2021?
On January 1, 2020, Waterway Corporation purchased 40% of the common shares of Wildhorse Company for $192,000. During the year, Wildhorse earned net income of $81,000 and paid dividends of $20,250.Prepare the entries for Waterway to record the purchase and any additional entries related to this investment in Wildhorse 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.)
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On January 1, 2022, Mojito Corporation purchased 20% (20,000 shares) of the outstanding stock of Dulcinea Corporation for $153,000. During 2022, Dulcinea Corporation paid total dividends of $45,000 and earned $80,000 in net income. At the end of 2022, Dulcinea Corporation’s stock had a fair market value of $155,000. Required: Prepare the journal entries that Mojito would make during 2022 assuming that they do NOT have significant influence over Dulcinea as a result of their stock ownership (i.e. fair value method). Prepare the journal entries that Mojito would make during 2022 assuming that they do have significant influence over Dulcinea as a result of their stock ownership (i.e. equity method).
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On March 31, 2024, Chow Brothers, Incorporated, bought 7% of KT Manufacturing’s capital stock for $51.2 million. KT’s net income for the year ended December 31, 2024, was $80.4 million. The fair value of the shares held by Chow was $35.8 million at December 31, 2024. KT did not declare or pay a dividend during 2024. Required: Prepare all appropriate journal entries related to the investment during 2024. Assume that Chow sold the stock on January 20, 2025, for $30.4 million. Prepare the journal entries to record the sale.
On January 1, 2022, Nichols Enterprises paid $100,000 for 6,200 shares of Elliott Electronics common stock. The ownership in Elliott Electronics is 10%. Nichols Enterprises does not have significant influence over Elliott Electronics. Elliott reported net income of $61,000 for the year ended December 31, 2022. The fair value of the Elliott stock December 31,2022 was $55 per share. What amount will be reported in the balance sheet of Nichols Enterprises for the investment in Elliott at December 31, 2022? Multiple Choice $341,000. $296,000. $281,000. $266,000.
4. On January 1, 2021, Evan Co. purchased all of the common stock of Kristopher Corp. by issuing 15,000 shares of $1 par value common stock. Evan’s shares had a $30 per share fair value. On that date, Kristopher reported a net book value of $275,000. However, its equipment (with a five-year remaining life) was undervalued by $60,000 in the company’s accounting records. Any excess of consideration transferred over fair value of assets and liabilities is assigned to an unrecorded patent to be amortized over ten years. During 2021, Kristopher earned net income of $155,000 and paid dividends of $40,000. Kristopher’s net income and dividends for 2022 were $178,000 and $65,000, respectively. Required: Calculate the balance in the investment account on the books of Evan Co. at the end of 2022 under each of the following methods: a. equity method b. partial equity method c. initial value method. .