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Equity-Method income Statement
Wealthy Manufacturing Company purchased 40 percent of the voting shares of Diversified Products Corporation on March 23, 20X4. On December 31, 20X8,Wealthy Manufacturing’s controller attempted to prepare income statements and
Wealthy manufacturing uses the equity method in accounting for its investment in Diversified
Products. The controller was also aware of the following specific transactions for Diversified Products in 20X8, which were not included in the preceding data:
1. Diversified sold its entire Health Technologies division on September 30, 20X8, for $375.000.The book value of Health Technologies division’s net assets on that date was $331,000. Thedivision incurred an operating loss of $15,000 in the first nine months of 20X8.
2. During 20X8,Diversified sold one of its delivery trucks after it was involved in an accidentand recorded a gain of $10,000.
Required
a. Prepare an income statement and retained earnings statement for Diversified Products for 20X8.
b. Prepare an income statement and retained earnings statement for Wealthy Manufacturing for 20X8.
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Chapter 2 Solutions
ADVANCED FINANCIAL ACCOUNTING-ACCESS
- Correct answer pleasearrow_forwardDo fast answer of this question general Accountingarrow_forwardJohn was a civil servant with the Trinidad & Tobago (T&T) Government for over 30 years and retired 5 years ago. He is in receipt of a monthly pension. John also received a lump sum on retirement and invested part of this in a small retail business in downtown San Fernando. He retails designer clothing and perfumes and manages to make a modest profit, after deduction of business expenses. John invested the remainder of his pension lump sum in the Unit Trust Corporation of Trinidad and Tobago and is in receipt of monthly dividends. John receives a monthly pension of $6,000. The retail business has a financial year- end of 31 December and in the fiscal year 2011 he made a taxable profit of $100,000. In the fiscal year 2011 in T&T there is a personal allowance of $60,000 and the rate of Income tax is 25%. John no longer qualifies for any of the other deductions available to individuals and receives his pension after deduction of tax under the P.A.Y.E. system. In 2011, John…arrow_forward
Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning