s On December 31, 2022, Akron, Incorporated, purchased 5 percent of Zip Company's common shares on the open market in exchange for $16,000 On December 31, 2023, Akron, Incorporated, acquires an additional 25 percent of Zip Company's outstanding common stock for $95,000 During the next two years, the following information is available for Zip Company Common Stock Fale Value (12/31) $ 320,000 350,000 480,000 Year 2022 2023 2024 Income $ 75,000 58,000 Dividends Declared $7,000 15,000 At December 31, 2023, Zip reports a net book value of $290,000 Akron attributed any excess of its 30 percent share of Zip's fair over book value to its share of Zip's franchise agreements. The franchise agreements had a remaining life of 10 years at December 31, 2023 Required: a. Assume Akron applies the equity method to its investment in Zip account. 1. What amount of equity income should Akron report for 2024? 2. On Akron's December 31, 2024, balance sheet, what amount is reported for the Investment in Zip account? b. Assume Akron uses fair-value accountin for its Investment in Zip account 1. What amount of income from its investment in Zip should Akron report for 20247 2. On Akron's December 31, 2024, balance sheet, what amount is reported for the investment in Zip account? 41 Equity income a2 Investment in Zip account b1 Reported income 62 Investment in Zip accound
s On December 31, 2022, Akron, Incorporated, purchased 5 percent of Zip Company's common shares on the open market in exchange for $16,000 On December 31, 2023, Akron, Incorporated, acquires an additional 25 percent of Zip Company's outstanding common stock for $95,000 During the next two years, the following information is available for Zip Company Common Stock Fale Value (12/31) $ 320,000 350,000 480,000 Year 2022 2023 2024 Income $ 75,000 58,000 Dividends Declared $7,000 15,000 At December 31, 2023, Zip reports a net book value of $290,000 Akron attributed any excess of its 30 percent share of Zip's fair over book value to its share of Zip's franchise agreements. The franchise agreements had a remaining life of 10 years at December 31, 2023 Required: a. Assume Akron applies the equity method to its investment in Zip account. 1. What amount of equity income should Akron report for 2024? 2. On Akron's December 31, 2024, balance sheet, what amount is reported for the Investment in Zip account? b. Assume Akron uses fair-value accountin for its Investment in Zip account 1. What amount of income from its investment in Zip should Akron report for 20247 2. On Akron's December 31, 2024, balance sheet, what amount is reported for the investment in Zip account? 41 Equity income a2 Investment in Zip account b1 Reported income 62 Investment in Zip accound
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On December 31, 2022, Akron, Incorporated, purchased 5 percent of Zip Company's common shares on the open market in exchange
for $16,000 On December 31, 2023, Akron, Incorporated, acquires an additional 25 percent of Zip Company's outstanding common
stock for $95,000
During the next two years, the following information is available for Zip Company,
Common Stock Fale
Value (12/31)
$320,000
350,000
450,000
Year
2022
2023
2024
Income
$75,000
50,000
Dividends
Declared
$7,000
15,000
At December 31, 2023, Zip reports a net book value of $290,000 Akron attributed any excess of its 30 percent share of Zip's fair over
book value to its share of Zip's franchise agreements. The franchise agreements had a remaining life of 10 years at December 31,
2023
Required:
a. Assume Akron applies the equity method to its investment in Zip account.
1. What amount of equity income should Akron report for 2024?
2. On Akron's December 31, 2024, balance sheet, what amount is reported for the Investment in Zip account?
b. Assume Akron uses fair value accounting for its Investment in Zip account
1. What amount of income from its investment in Zip should Akron report for 2024?
2. On Akron's December 31, 2024, balance sheet, what amount is reported for the investment in Zip account?
#1 Equity income
a2 Investment in Zip account
b1 Reported income
62. Investment in Zip accound
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