Orange Company owns 20% of Blue Company, and accounts for its investment using the equity method. On the date of acquisition, the fair values of Blue's net assets equaled book values. At the beginning of 2XX1, the Equity Investment was reported on Orange's balance sheet at $2,400,000. During 2XX1, Blue reported net income of $600,000 and paid dividends of $360,000. During 2XX2, Blue reported net income of $900,000 and paid dividends of $200,000, In 2XX1, Orange sold inventory to Blue, realizing a gross profit of $240,000 on the sale. At the end of 2XX1, 25% of the inventory remained unsold by Blue. In 2XX2, Blue sells the inventory from the 2XX1 intercompany transaction to an unaffiliated party. Provide Equity Income ending balance in Equity Investment for both years. 2XX1 2XX2 Equity Income 0 $0

Orange Company owns 20% of Blue Company, and accounts for its investment using the equity method. On the date of acquisition, the fair values of Blue's net assets equaled book values. At the beginning of 2XX1, the Equity Investment was reported on Orange's balance sheet at $2,400,000. During 2XX1, Blue reported net income of $600,000 and paid dividends of $360,000. During 2XX2, Blue reported net income of $900,000 and paid dividends of $200,000, In 2XX1, Orange sold inventory to Blue, realizing a gross profit of $240,000 on the sale. At the end of 2XX1, 25% of the inventory remained unsold by Blue. In 2XX2, Blue sells the inventory from the 2XX1 intercompany transaction to an unaffiliated party. Provide Equity Income ending balance in Equity Investment for both years. 2XX1 2XX2 Equity Income 0 $0

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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