Advanced Accounting
14th Edition
ISBN: 9781260247824
Author: Joe Ben Hoyle, Thomas F. Schaefer, Timothy S. Doupnik
Publisher: RENT MCG
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Chapter 1, Problem 25P
Matthew, Inc., owns 30 percent of the outstanding stock of Lindman Company and has the ability to significantly influence the investee’s operations and decision making. On January 1, 2021, the balance in the Investment in Lindman account is $335,000. Amortization associated with this acquisition is $9,000 per year. In 2021, Lindman earns an income of $90,000 and declares cash dividends of $30,000. Previously, in 2020, Lindman had sold inventory costing $24,000 to Matthew for $40,000. Matthew consumed all but 25 percent of this merchandise during 2020 and used the rest during 2021. Lindman sold additional inventory costing $28,000 to Matthew for $50,000 in 2021. Matthew did not consume 40 percent of these 2021 purchases from Lindman until 2022.
a. What amount of equity method income would Matthew recognize in 2021 from its ownership interest in Lindman?
b. What is the equity method balance in the Investment in Lindman account at the end of 2021?
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Matthew, Inc., owns 30 percent of the outstanding stock of Lindman Company and has the ability to significantly influence the investee’s operations and decision making. On January 1, 2021, the balance in the Investment in Lindman account is $365,000. Amortization associated with this acquisition is $12,600 per year. In 2021, Lindman earns an income of $132,000 and declares cash dividends of $33,000. Previously, in 2020, Lindman had sold inventory costing $33,600 to Matthew for $56,000. Matthew consumed all but 20 percent of this merchandise during 2020 and used the rest during 2021. Lindman sold additional inventory costing $44,800 to Matthew for $80,000 in 2021. Matthew did not consume 40 percent of these 2021 purchases from Lindman until 2022.
What amount of equity method income would Matthew recognize in 2021 from its ownership interest in Lindman?
What is the equity method balance in the Investment in Lindman account at the end of 2021?
Surrell Inc. owns 30% of the outstanding voting common stock of Vicker Co. and has the ability to significantly influence the investee's operations and decision
making. On January 1, 2019, the balance in the Investment in Vicker Co. account was $402,000. Amortization associated with this acquisition is $10,800 per
year. During 2019, Vicker earned an income of $108,000 and paid cash dividends of $36,000. Previously in 2018, Vicker had sold inventory costing $28,800 to
Surrell for $48,000. All but 25% of this merchandise was consumed by Surrell during 2018. The remainder was used during the first few weeks of 2019.
Additional sales were made to Surrell in 2019; inventory costing $33,600 was transferred at a price of $60,000. Of this total, 40% was not consumed until 2020.
What amount of equity income would Surrell have recognized in 2019 from its ownership interest in Vicker? $9,936. $24,840. $19,872. $21,114. $18,948.
Matthew, Incorporated, owns 30 percent of the outstanding stock of Lindman Company and
has the ability to significantly influence the investee's operations and decision making. On
January 1, 2024, the balance in the Investment in Lindman account is $365,000. Amortization
associated with this acquisition is $12,600 per year. In 2024, Lindman earns an income of
$132,000 and declares cash dividends of $33,000. Previously, in 2023, Lindman had sold
inventory costing $33,600 to Matthew for $56,000. Matthew consumed all but 20 percent of
this merchandise during 2023 and used the rest during 2024. Lindman sold additional
inventory costing $44,800 to Matthew for $80,000 in 2024. Matthew did not consume 40
percent of these 2024 purchases from Lindman until 2025.
Required:
a. What amount of equity method income would Matthew recognize in 2024 from its
ownership interest in Lindman?
b. What is the equity method balance in the Investment in Lindman account at the end of
2024?
a. Equity income
b.…
Chapter 1 Solutions
Advanced Accounting
Ch. 1 - What advantages does a company achieve when it...Ch. 1 - A company acquires a rather large investment in...Ch. 1 - What accounting treatments are appropriate for...Ch. 1 - Prob. 4QCh. 1 - Why does the equity method record dividends from...Ch. 1 - Prob. 6QCh. 1 - Smith. Inc., has maintained an ownership interest...Ch. 1 - Prob. 8QCh. 1 - Because of the acquisition of additional investee...Ch. 1 - Prob. 10Q
Ch. 1 - Prob. 11QCh. 1 - Prob. 12QCh. 1 - In a stock acquisition accounted for by the equity...Ch. 1 - Prob. 14QCh. 1 - What is the difference between downstream and...Ch. 1 - Prob. 16QCh. 1 - Prob. 17QCh. 1 - What is the fair-value option for reporting equity...Ch. 1 - When an investor uses the equity method to account...Ch. 1 - Prob. 2PCh. 1 - Prob. 3PCh. 1 - Under fair-value accounting for an equity...Ch. 1 - When an equity method investment account is...Ch. 1 - Prob. 6PCh. 1 - Prob. 7PCh. 1 - Prob. 8PCh. 1 - Evan Company reports net income of $140,000 each...Ch. 1 - Prob. 10PCh. 1 - Prob. 11PCh. 1 - Prob. 12PCh. 1 - Prob. 13PCh. 1 - Prob. 14PCh. 1 - Prob. 15PCh. 1 - Prob. 16PCh. 1 - Prob. 17PCh. 1 - Prob. 18PCh. 1 - Prob. 19PCh. 1 - Prob. 20PCh. 1 - Prob. 21PCh. 1 - Prob. 23PCh. 1 - Matthew, Inc., owns 30 percent of the outstanding...Ch. 1 - Prob. 26PCh. 1 - Prob. 28PCh. 1 - Prob. 29PCh. 1 - Prob. 30PCh. 1 - Prob. 31P
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