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On July 1, 2022, Burrough Company acquired 102,000 of the outstanding shares of Carter Company for $16 per share. This acquisition gave Burrough a 40 percent ownership of Carter and allowed Burrough to significantly influence the investee's decisions. As of July 1, 2022, the investee had assets with a book value of $4 million and liabilities of $830,750. At the time, Carter held equipment appraised at $148,750 more than book value; it was considered to have a seven-year remaining life with no salvage value. Carter also held a copyright with a five-year remaining life on its books that was undervalued by $580,000. Any remaining excess cost was attributable to an indefinite-lived trademark. Depreciation and amortization are computed using the straight-line method. Burrough applies the equity method for its investment in Carter. Carter's policy is to declare and pay a $1 per share cash dividend every April 1 and October 1. Carter's income, earned evenly throughout each year, was $559,000 in 2022, $584,800 in 2023, and $643,200 in 2024. In addition, Burrough sold inventory costing $105,600 to Carter for $176,000 during 2023. Carter resold $97,000 of this inventory during 2023 and the remaining $79,000 during 2024. Required: a. Determine the equity income to be recognized by Burrough during each of these years. b. Compute Burrough's investment in Carter Company's balance as of December 31, 2024. Note: For all requirements, enter your answers in whole dollars and not in millions. a. Equity income 2022 a. Equity income 2023 a. Equity income 2024 b. Investment in Carter

On July 1, 2022, Burrough Company acquired 102,000 of the outstanding shares of Carter Company for $16 per share. This acquisition gave Burrough a 40 percent ownership of Carter and allowed Burrough to significantly influence the investee's decisions. As of July 1, 2022, the investee had assets with a book value of $4 million and liabilities of $830,750. At the time, Carter held equipment appraised at $148,750 more than book value; it was considered to have a seven-year remaining life with no salvage value. Carter also held a copyright with a five-year remaining life on its books that was undervalued by $580,000. Any remaining excess cost was attributable to an indefinite-lived trademark. Depreciation and amortization are computed using the straight-line method. Burrough applies the equity method for its investment in Carter. Carter's policy is to declare and pay a $1 per share cash dividend every April 1 and October 1. Carter's income, earned evenly throughout each year, was $559,000 in 2022, $584,800 in 2023, and $643,200 in 2024. In addition, Burrough sold inventory costing $105,600 to Carter for $176,000 during 2023. Carter resold $97,000 of this inventory during 2023 and the remaining $79,000 during 2024. Required: a. Determine the equity income to be recognized by Burrough during each of these years. b. Compute Burrough's investment in Carter Company's balance as of December 31, 2024. Note: For all requirements, enter your answers in whole dollars and not in millions. a. Equity income 2022 a. Equity income 2023 a. Equity income 2024 b. Investment in Carter

Intermediate Accounting: Reporting And Analysis
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter13: Investments And Long-term Receivables
Section: Chapter Questions
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On July 1, 2022, Burrough Company acquired 102,000 of the outstanding shares of Carter Company for $16 per share. This acquisition gave Burrough a 40 percent ownership of Carter and allowed Burrough to significantly influence the investee's decisions. As of July 1, 2022, the investee had assets with a book value of $4 million and liabilities of $830,750. At the time, Carter held equipment appraised at $148,750 more than book value; it was considered to have a seven-year remaining life with no salvage value. Carter also held a copyright with a five-year remaining life on its books that was undervalued by $580,000. Any remaining excess cost was attributable to an indefinite-lived trademark. Depreciation and amortization are computed using the straight-line method. Burrough applies the equity method for its investment in Carter. Carter's policy is to declare and pay a $1 per share cash dividend every April 1 and October 1. Carter's income, earned evenly throughout each year, was $559,000 in 2022, $584,800 in 2023, and $643,200 in 2024. In addition, Burrough sold inventory costing $105,600 to Carter for $176,000 during 2023. Carter resold $97,000 of this inventory during 2023 and the remaining $79,000 during 2024. Required: a. Determine the equity income to be recognized by Burrough during each of these years. b. Compute Burrough's investment in Carter Company's balance as of December 31, 2024. Note: For all requirements, enter your answers in whole dollars and not in millions. a. Equity income 2022 a. Equity income 2023 a. Equity income 2024 b. Investment in Carter
Transcribed Image Text:On July 1, 2022, Burrough Company acquired 102,000 of the outstanding shares of Carter Company for $16 per share. This acquisition gave Burrough a 40 percent ownership of Carter and allowed Burrough to significantly influence the investee's decisions. As of July 1, 2022, the investee had assets with a book value of $4 million and liabilities of $830,750. At the time, Carter held equipment appraised at $148,750 more than book value; it was considered to have a seven-year remaining life with no salvage value. Carter also held a copyright with a five-year remaining life on its books that was undervalued by $580,000. Any remaining excess cost was attributable to an indefinite-lived trademark. Depreciation and amortization are computed using the straight-line method. Burrough applies the equity method for its investment in Carter. Carter's policy is to declare and pay a $1 per share cash dividend every April 1 and October 1. Carter's income, earned evenly throughout each year, was $559,000 in 2022, $584,800 in 2023, and $643,200 in 2024. In addition, Burrough sold inventory costing $105,600 to Carter for $176,000 during 2023. Carter resold $97,000 of this inventory during 2023 and the remaining $79,000 during 2024. Required: a. Determine the equity income to be recognized by Burrough during each of these years. b. Compute Burrough's investment in Carter Company's balance as of December 31, 2024. Note: For all requirements, enter your answers in whole dollars and not in millions. a. Equity income 2022 a. Equity income 2023 a. Equity income 2024 b. Investment in Carter
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