Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN: 9781337788281
Author: James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher: Cengage Learning
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Chapter 13, Problem 8MC
To determine
Calculate the amount that Incorporation P should have carried its investment in Corporation B.
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In January 2020, Domingo, Inc., acquired 20 percent of the outstanding common stock of Martes, Inc., for $856,000. This investment gave Domingo the ability to exercise significant influence over Martes, whose balance sheet on that date showed total assets of $4,634,000 with liabilities of $974,000. Any excess of cost over book value of the investment was attributed to a patent having a remaining useful life of 10 years.
In 2020, Martes reported net income of $259,000. In 2021, Martes reported net income of $302,250. Dividends of $73,000 were declared in each of these two years. What is the equity method balance of Domingo’s Investment in Martes, Inc., at December 31, 2021?
Multiple Choice
$914,250.
$1,001,850.
$1,014,250.
$939,050.
On January 1, 2021, Pine Company owns 40 percent (76,000 shares) of Seacrest, Inc., which it purchased several years ago for
$423,700. Since the date of acquisition, the equity method has been properly applied, and the carrying amount of the investment
account as of January 1, 2021, is $549,100. Excess patent cost amortization of $22,800 is still being recognized each year. During 2021,
Seacrest reports net income of $558,000 and a $228,000 other comprehensive loss, both incurred uniformly throughout the year. No
dividends were declared during the year. Pine sold 15,200 shares of Seacrest on August 1, 2021, for $165,354 in cash. However, Pine
retains the ability to significantly influence the investee.
During the last quarter of 2020, Pine sold $59,000 in inventory (which it had originally purchased for only $35,400) to Seacrest. At the
end of that fiscal year, Seacrest's inventory retained $14,600 (at sales price) of this merchandise, which was subsequently sold in the
first quarter…
On January 1, 2021, Pine Company owns 40 percent (84,000 shares) of Seacrest, Ic., which it purchased
several years ago for $449,400. Since the date of acquisition, the equity method has been properly applied,
and the carrying amount of the investment account as of January 1, 2021, is $588,000. Excess patent cost
amortization of $25,200 is still being recognized each year. During 2021, Seacrest reports net income of
$606,000 and a $252,000 other comprehensive loss, both incurred uniformly throughout the year. No
dividends were declared during the year. Pine sold 16,800 shares of Seacrest on August 1, 2021, for $170,401
in cash. However, Pine retains the ability to significantly influence the investee.
During the last quarter of 2020, Pine sold $61,000 in inventory (which it had originally purchased for only
$36,600) to Seacrest. At the end of that fiscal year, Seacrest's inventory retained $13,300 (at sales price) of
this merchandise, which was subsequently sold in the first quarter of…
Chapter 13 Solutions
Intermediate Accounting: Reporting And Analysis
Ch. 13 - Prob. 1GICh. 13 - Provide brief definitions for the following terms:...Ch. 13 - What are the three categories of investments in...Ch. 13 - Prob. 4GICh. 13 - Prob. 5GICh. 13 - Identify the accounting methods a company uses for...Ch. 13 - Briefly summarize the accounting for an investment...Ch. 13 - Prob. 8GICh. 13 - Prob. 9GICh. 13 - Prob. 10GI
Ch. 13 - Prob. 11GICh. 13 - Prob. 12GICh. 13 - Prob. 13GICh. 13 - Prob. 14GICh. 13 - Prob. 15GICh. 13 - Briefly describe how to determine and record the...Ch. 13 - Prob. 17GICh. 13 - Prob. 18GICh. 13 - Prob. 19GICh. 13 - Briefly describe how to determine and record any...Ch. 13 - Prob. 21GICh. 13 - Prob. 22GICh. 13 - Prob. 23GICh. 13 - Prob. 24GICh. 13 - How does IFRS categorize minority passive...Ch. 13 - Prob. 26GICh. 13 - Prob. 27GICh. 13 - Prob. 28GICh. 13 - Prob. 29GICh. 13 - Prob. 30GICh. 13 - Prob. 31GICh. 13 - What is a fund? Distinguish between a fund and an...Ch. 13 - Prob. 33GICh. 13 - Prob. 34GICh. 13 - Prob. 1MCCh. 13 - During 2021, Anthony Company purchased debt...Ch. 13 - On July 1, 2019, Aldrich Company purchased as an...Ch. 13 - In 2021, Cromwell Corporation purchased bonds of...Ch. 13 - Prob. 5MCCh. 13 - A security in a portfolio of available-for-sale...Ch. 13 - On its December 31, 2018, balance sheet, Fay...Ch. 13 - Prob. 8MCCh. 13 - Cash dividends declared out of current earnings...Ch. 13 - On January 1, 2019, Park Company accepted a...Ch. 13 - Prob. 1RECh. 13 - Prob. 2RECh. 13 - Prob. 3RECh. 13 - Refer to the information in RE 13-3. Assume that...Ch. 13 - Prob. 5RECh. 13 - Refer to the information in RE13-5. Assume that on...Ch. 13 - Refer to the information in RE13-5. Assume that on...Ch. 13 - Prob. 8RECh. 13 - On February 1, 2019, Razorback Corporation decides...Ch. 13 - On September 30, Franz Corporation notices a...Ch. 13 - Prob. 11RECh. 13 - Refer to the information in RE13-11. Assume that...Ch. 13 - Prob. 13RECh. 13 - Prob. 14RECh. 13 - On January 1, Kilgore Inc. accepts a 20,000...Ch. 13 - Prob. 16RECh. 13 - Prob. 1ECh. 13 - Held-to-Maturity Securities and Amortization of a...Ch. 13 - Prob. 3ECh. 13 - Prob. 4ECh. 13 - Investment Discount Amortization Schedule On...Ch. 13 - Investment Premium Amortization Schedule On...Ch. 13 - Prob. 7ECh. 13 - Trading Securities At the beginning of 2019, Able...Ch. 13 - Prob. 9ECh. 13 - Prob. 10ECh. 13 - Available-for-Sale Securities On December 31,...Ch. 13 - Available-for-Sale Securities At the beginning of...Ch. 13 - Available-for-Sale Securities At the end of 2018,...Ch. 13 - Transfer between Categories On December 31, 2018,...Ch. 13 - Impairment On June 1, 2019, Hansen Company...Ch. 13 - Equity Securities Midwest Bank invests in equity...Ch. 13 - Equity Securities Southeast Bank invests in equity...Ch. 13 - Prob. 18ECh. 13 - Prob. 19ECh. 13 - Prob. 20ECh. 13 - Notes Receivable On January 1, 2019, Crouser...Ch. 13 - Notes Receivable On January 1, 2019, Worthylake...Ch. 13 - Note Receivable in Installments On January 1,...Ch. 13 - Notes Receivable and Income On January 1, 2019,...Ch. 13 - Prob. 25ECh. 13 - Sinking Funds Entries The following information is...Ch. 13 - (Appendix 13.1) Derivatives Anglar Company has a 3...Ch. 13 - Prob. 1PCh. 13 - Prob. 2PCh. 13 - Prob. 3PCh. 13 - Bond Investment Premium Amortization Schedule...Ch. 13 - Prob. 5PCh. 13 - Trading Securities Akers Company invests its...Ch. 13 - Investment in Trading Securities The following...Ch. 13 - Prob. 8PCh. 13 - Available-for-Sale Securities Holly Company...Ch. 13 - Investment in Available-for-Sale Bonds The...Ch. 13 - Investments in Available-for-Sale Bonds During...Ch. 13 - Equity Securities The investment manager of 4th...Ch. 13 - Equity Securities 8th State Bank prepares interim...Ch. 13 - Investments in Equity Securities Noonan...Ch. 13 - Investments in Equity Securities Manson...Ch. 13 - Prob. 16PCh. 13 - Prob. 17PCh. 13 - Prob. 18PCh. 13 - Prob. 19PCh. 13 - Equity Method and Subsequent Sale On January 1,...Ch. 13 - Prob. 21PCh. 13 - Notes Receivable On January 1, 2019, Somerville...Ch. 13 - Notes Receivable On January 1, 2019, Lisa Company...Ch. 13 - Comprehensive Notes Receivable On January 1, 2019,...Ch. 13 - Prob. 25PCh. 13 - (Appendix 13.1) Derivatives Danburg. Company has a...Ch. 13 - Realized and Unrealized Losses An important part...Ch. 13 - Investments in Securities Cane Company has two...Ch. 13 - Prob. 3CCh. 13 - Victoria Company has investments in marketable...Ch. 13 - Available-for-Sale Securities The following are...Ch. 13 - Prob. 6CCh. 13 - You are an accountant for Davanzo Company. The...Ch. 13 - Prob. 8C
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- In January 2020, Domingo, Inc., acquired 20 percent of the outstanding common stock of Martes, Inc., for $846,000. This investment gave Domingo the ability to exercise significant influence over Martes, whose balance sheet on that date showed total assets of $4,428,000 with liabilities of $978,000. Any excess of cost over book value of the investment was attributed to a patent having a remaining useful life of 10 years. In 2020, Martes reported net income of $221,000. In 2021, Martes reported net income of $266,000. Dividends of $94,000 were declared in each of these two years. What is the equity method balance of Domingo’s Investment in Martes, Inc., at December 31, 2021?arrow_forwardOn January 3, 2020, Gladstone Corporation purchased 30% of the outstanding voting common stock of Hancock Company for $610,000. This purchase gave Gladstone the ability to exercise significant influence over the operating and financial policies of Hancock. On the date of purchase, Hancock's books reported assets of $3,000,000 and liabilities of $800,000. Any excess of cost over book value of Gladstone's investment was attributed to a patent with a remaining useful life of ten years. During 2020, Hancock reported net income of $295,000 and declared and paid cash dividends of $80,000. In the following year, 2021, Hancock reported net income of $325,000 and declared and paid cash dividends of $75,000. In 2020, Gladstone sold inventory costing $55,000 to Hancock for $70,000. Hancock sold 65% of that inventory to outsiders during 2020 with the remainder being sold in 2021. During 2021, Gladstone sold inventory costing $45,000 to Hancock for $85,000. Hancock sold 90% of that inventory to…arrow_forwardPentamedia owns 90 percent of Sesa. At the start of 2019, Sesa sold buildings carried at $4,000,000, net, to Pentamedia for $6,000,000. The buildings had a remaining life of 10 years and straight-line depreciation is used. Pentamedia uses the complete equity method to record its investment in Sesa. In 2024, Pentamedia sold the buildings to an outside company. Prepare the consolidated working paper at December 31, 2024:arrow_forward
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- On July 1, 2019, Killearn Company acquired 138,000 of the outstanding shares of Shaun Company for $20 per share. This acquisition gave Killearn a 40 percent ownership of Shaun and allowed Killearn to significantly influence the investee’s decisions. As of July 1, 2019, the investee had assets with a book value of $6 million and liabilities of $167,750. At the time, Shaun held equipment appraised at $288,750 more than book value; it was considered to have a seven-year remaining life with no salvage value. Shaun also held a copyright with a five-year remaining life on its books that was undervalued by $607,500. Any remaining excess cost was attributable to goodwill. Depreciation and amortization are computed using the straight-line method. Killearn applies the equity method for its investment in Shaun. Shaun's policy is to declare and pay a $1 per share cash dividend every April 1 and October 1. Shaun's income, earned evenly throughout each year, was $641,000 in 2019, $670,000 in…arrow_forwardAdams Corporation acquired 90 percent of the outstanding voting shares of Barstow, Inc., on December 31, 2019. Adams paid a total of $603,000 in cash for these shares. The 10 percent noncontrolling interest shares traded on a daily basis at fair value of $67,000 both before and after Adams's acquisition. On December 31, 2019, Barstow had the following account balances: Current assets Land Buildings (10-year remaining life) Equipment (5-year remaining life) Patents (10-year remaining life) Notes payable (due in years) Common stock Retained earnings, 12/31/19 Debits Current assets Land Buildings. Equipment Investment in Barstow, Inc. Cost of goods sold Depreciation expense December 31, 2021, adjusted trial balances for the two companies follow: Adams Corporation Interest expense Dividends declared Total debits Credits Notes payable Common stock Retained earnings, 1/1/21 Revenues Investment income Total credits Book Value $ 160,000 120,000 220,000 160,000 $ 0 (200,000) (180,000) (280,000)…arrow_forwardOn January 2, 2020, Kent Corp. paid 1,600,000 for the purchase of 40% of the ordinary shares of Kara Company. The statement of financial position of Kara at the date of acquisition shows the following information:Assets subject to depreciation (remaining useful life is 8 years) 2,400,000Assets not subject to depreciation 800,000Liabilties 400,000Both book value and fair value are the same for assets not subject to depreciation and liabilities. The fair market value of Karas assets subject to depreciation is 2,720,000. Kara depreciates its assets using the straight-line method. Karas intangibles are amortized over a 20-year period. Net income for the year ended December 31, 2020, is 640,000. It declares and pays dividends of 500,000 in 2020.What amount of the investment cost is attributable to goodwill? a. 480,000 b. 352,000 c. 608,000 d. 128,000arrow_forward
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