Advanced Accounting (Looseleaf)
12th Edition
ISBN: 9780077632595
Author: Hoyle
Publisher: MCG
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Question
Chapter 4, Problem 12P
To determine
Identify the appropriate answer for the given statement from the given choices.
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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 $341,000. Amortization of excess fair value associated with the 30% ownership is $17,400 per year. In 2021, Lindman earns an income of $159,000 and declares cash dividends of $53,000. Previously, in 2020, Lindman had sold inventory costing $47,200 to Matthew for $59,000. Matthew consumed all but 25 percent of this merchandise during 2020 and used the rest during 2021. Lindman sold additional inventory costing $60,800 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?
Lone Star Company is a calendar-year corporation, and this year Lone Star reported $122,000 in current E&P that accrued evenly throughout the year. At the beginning of the year, Lone Star’s accumulated E&P was $14,640. At the beginning of the year, Lone Star’s sole shareholder was Matt McCon. Lone Star declared $36,600 in cash distributions on each of the following dates: March 31, June 30, September 30, and December 31. (Leave no answer blank. Enter zero if applicable. Negative amount should be indicated by a minus sign.)
b. Suppose that Matt sold half of his shares to Chris Coop on June 1st for $51,000. How much dividend income will Matt recognize this year?
Dividend recognized:
c. If Matt’s basis in his Lone Star shares was $8,100 at the beginning of the year, how much capital gain will he recognize on the sale and distributions from Lone Star?
Capital gain recognized on the sale and distribution:
As a long-term investment, Painters' Equipment Company purchased 20% of AMC Supplies Incorporated's 430,000 shares
for $510,000 at the beginning of the fiscal year of both companies. On the purchase date, the fair value and book value of
AMC's net assets were equal. During the year, AMC earned net income of $280,000 and distributed cash dividends of 15
cents per share. At year-end, the fair value of the shares is $538,000.
Required:
1. Assume no significant influence was acquired. Prepare the appropriate journal entries from the purchase through the end of the
year.
Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.
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Journal entry worksheet
1 2 3 4
Record the purchase of AMC Supplies shares for $510,000 as a long-term
investment.
Note: Enter debits before credits.
Transactions
General Journal
Debit
Credit
Chapter 4 Solutions
Advanced Accounting (Looseleaf)
Ch. 4 - Prob. 1QCh. 4 - Atwater Company acquires 80 percent of the...Ch. 4 - What is a control premium and how does it affect...Ch. 4 - Prob. 4QCh. 4 - How is the noncontrolling interest in a subsidiary...Ch. 4 - Prob. 6QCh. 4 - Prob. 7QCh. 4 - Prob. 8QCh. 4 - Prob. 9QCh. 4 - Prob. 10Q
Ch. 4 - Prob. 1PCh. 4 - Prob. 2PCh. 4 - Prob. 3PCh. 4 - Prob. 4PCh. 4 - Prob. 5PCh. 4 - Prob. 6PCh. 4 - Prob. 7PCh. 4 - Prob. 8PCh. 4 - Prob. 9PCh. 4 - Prob. 10PCh. 4 - Prob. 11PCh. 4 - Prob. 12PCh. 4 - Prob. 13PCh. 4 - Prob. 14PCh. 4 - Prob. 15PCh. 4 - Prob. 16PCh. 4 - Prob. 17PCh. 4 - Prob. 18PCh. 4 - Current liabilities: a. 50,000 b. 46,000 c. 40,000...Ch. 4 - Prob. 20PCh. 4 - Stockholders equity: a. 80,000 b. 90,000 c. 95,000...Ch. 4 - Prob. 22PCh. 4 - Prob. 23PCh. 4 - Prob. 24PCh. 4 - Prob. 25PCh. 4 - Prob. 26PCh. 4 - Prob. 27PCh. 4 - Prob. 28PCh. 4 - Prob. 29PCh. 4 - Prob. 30PCh. 4 - Prob. 31PCh. 4 - Prob. 32PCh. 4 - Prob. 33PCh. 4 - Prob. 34PCh. 4 - Prob. 35PCh. 4 - Prob. 36PCh. 4 - Prob. 37PCh. 4 - Prob. 38PCh. 4 - Prob. 39PCh. 4 - Prob. 40PCh. 4 - Prob. 41PCh. 4 - Prob. 42PCh. 4 - Prob. 1DYS
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