Winston Corporation purchased 40 percent of the stock of Fullbright Company on January 1, 20X2, at underlying book value. Duringthe period of January 1, 20X2, through December 31, 20X4, the market value of Winston's investment in Fullbright's stock increased by$20,000 each year. The companies reported the following operating results and dividend payments during the first three years ofintercorporate ownership:Year20X220X320X4Winston CorporationOperatingIncome$100,000Year20X220X320X460,000250,000Dividends$ 40,00080,000120,000Fullbright CompanyDividendsNet IncomeFair Value Equity MethodNet Income$70,00040,00025,000Required:Compute the net income reported by Winston for each of the three years, assuming it accounts for its investment in Fullbright bycarrying the investment at fair value, or using the equity method.$30,00060,00050,000

Under the equity method of accounting, an investment is first recorded at cost and then adjusted for…

Answered: Winston Corporation purchased 40…

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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Gant Company purchased 30 percent of the outstanding shares of Temp Company for $74,000 on January 1, 20X6. The following results are reported for Temp Company: 20X6 Net income $ 46,000 20X7 $ 41,000 Dividends paid 20X8 $ 53,000 12,000 29,000 17,000 Fair value of shares held by Gant: January 1 74,000 93,000 90,000 December 31 93,000 90,000 101,000 Required: Determine the amounts reported by Gant as income from its investment in Temp for each year and the balance in Gant's investment in Temp at the end of each year assuming that Gant uses the following options in accounting for its investment in Temp: a. Carries the investment at fair value. b. Uses the equity method. Complete this question by entering your answers in the tabs below. Required A Required B Determine the amounts reported by Gant as income from its investment in Temp for each year and the balance in Gant's investment in Temp at the end of each year assuming that Gant uses the equity method in accounting for its investment…
For Year 1, prepare any journal and adjusting entries related to the investment in Band Inc.
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P Co. issued 6,000 shares of its common stock, valued at $300,000, to the former shareholders of S Company two years after S Company was acquired in a stock acquisition. The additional shares were issued because P Company agreed to issue additional shares of common stock if the average post combination earnings over the next two years exceeded $600,000. P Company balance sheet will result a(n): Increase in common stock Decrease in cash Increase in cash O Increase in retained earnings P Company acquired the net assets of -> ... 37

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