On September 1, Year 1, Test Company purchased 2,000 shares of A Company common stock for $25 per share. The investment represents a less than 1% ownership interest. On the date of acquisition, the fair value of A Company's net assets exceeded the book value by $100,000. The attributable to buildings with a remaining useful life of 10 years. During both Year 1 and Year 2, A Company paid dividends of $0.50 per share. A Company reported net income of $2,000,000 for the year ended December 31, Year 1 and $2,100,000 for the year ended December 31 Year 2. The fair value of A Company's common stock was $27 per share on December 31, Year 1 and $28 per share on December 31, Year 2. amount Assume that Tests Company held no other investments during Year 1 or Year 2. Determine the amount that pretax income would increase (decrease) in Year 2 as a result of the investment. Give your answer using dollar signs and commas but not decimals (cents). Example: $12.345 or $(12,345)

On September 1, Year 1, Test Company purchased 2,000 shares of A Company common stock for $25 per share. The investment represents a less than 1% ownership interest. On the date of acquisition, the fair value of A Company's net assets exceeded the book value by $100,000. The attributable to buildings with a remaining useful life of 10 years. During both Year 1 and Year 2, A Company paid dividends of $0.50 per share. A Company reported net income of $2,000,000 for the year ended December 31, Year 1 and $2,100,000 for the year ended December 31 Year 2. The fair value of A Company's common stock was $27 per share on December 31, Year 1 and $28 per share on December 31, Year 2. amount Assume that Tests Company held no other investments during Year 1 or Year 2. Determine the amount that pretax income would increase (decrease) in Year 2 as a result of the investment. Give your answer using dollar signs and commas but not decimals (cents). Example: $12.345 or $(12,345)

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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Wendy Marvel sold $260,000 of its inventory to Carla during 2021 for $400,000. Carla sold $300,000 of this merchandise in 2021 with the remainder to be disposed of during 2022. Assume Wendy Marvel owns 35% of Carla and has the ability to exert significant influence over Carla. What journal entry will be recorded at the end of 2021 to defer the recognition of the investor's share of the intra- entity gross profits? A) Equity in Carla B) C) D) Investment in Carla Investment in Carla Equity in Carla Equity in Carla Investment in Carla Investment in Carla Equity in Carla $35,000 $35,000 $12,250 $12,250 35,000 $35,000 $12,250 $12,250
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