On February 2, 2020, Groove Company purchased 15% of Pop Company's common stock for $54,000. Pop's net income for the years ended December 31, 2020, and December 31, 2021, were $16,000 and $54,000, respectively. On July 30, 2020, Pop declared and paid a dividend of $66,500. On December 31, 2020, the fair value of the Pop stock owned by Groove had increased to $72,000. How much should Groove show in the 2020 income statement as income from this investment? Multiple Choice $18.000. $9.975. $24,000. $27,975. < Prev 5 of 16 Next >

On February 2, 2020, Groove Company purchased 15% of Pop Company's common stock for $54,000. Pop's net income for the years ended December 31, 2020, and December 31, 2021, were $16,000 and $54,000, respectively. On July 30, 2020, Pop declared and paid a dividend of $66,500. On December 31, 2020, the fair value of the Pop stock owned by Groove had increased to $72,000. How much should Groove show in the 2020 income statement as income from this investment? Multiple Choice $18.000. $9.975. $24,000. $27,975. < Prev 5 of 16 Next >

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

ChapterA2: Investments

Section: Chapter Questions

Problem 25E

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On January 2, 2020, Black Company purchased 17% of Rock Company's common stock for $51,000. Rock's net income for the years ended December 31, 2020, and December 31, 2021, were $15,000 and $59,000, respectively. During 2020, Rock declared and paid a dividend of $67,500. On December 31, 2020, the fair value of the Rock stock owned by Black had increased to $69,000. How much should Black show in the 2020 income statement as income from this investment? Multiple Choice $29,475. There is no correct answer. $24,000. $11,475. $18,000. ME MacBook Air
On January 2, 2021, Zwick Company purchased 15% of Handy Corporation's common stock for $51,000. Handy's net income for the years ended December 31, 2021, and December 31, 2022, were $14,000 and $53,000, respectively. During 2021, Handy declared and paid a dividend of $66,000. On December 31, 2021, the fair value of the Handy stock owned by Zwick had increased to $67,000. How much should Zwick show in the 2021 income statement as income from this investment? Multiple Choice $22,000. $25,900. $16,000. $9,900.
On January 2, 2020, Howdy Doody Corporation purchased 17% of Ranger Corporation's common stock for $55,000. Ranger's net income for the years ended December 31, 2020, and December 31, 2021, were $11,000 and $56,000, respectively. During 2020, Ranger declared and paid a dividend of $67,500. On December 31, 2020, the fair value of the Ranger stock owned by Howdy Doody had increased to $72,000. How much should Howdy Doody show in the 2020 income statement as income from this investment? $11,475. $23,000. $17,000. $28,475.
On January 1, 2020, Santos Ltd. purchased 30% of Yardley Co.’s 50,000 outstanding common shares at a price of $20 per share. This price is based on Yardley’s net assets. On June 30, Yardley declared and paid a cash dividend of $60,000. On December 31, 2020, Yardley reported net income of $120,000 for the year. At this time, the shares had a fair value of $23. Santos’s year-end is December 31. Required: a. Assuming that Santos does not have any significant influence over Yarder, prepare all the 2020 entries relating to this investment using the FVTPL classification. b. Prepare all the 2020 entries relating to this investment if it was classified as cost due to no active markets. c. Prepare all the 2020 entries relating to this investment assuming that Santos has significant influence over Yarder. Santos uses the equity method of accounting.
. On January 1, 2020, Santos Ltd. purchased 30% of Yardley Co.'s 50,000 outstanding common shares at a price of $20 per share. This price is based on Yardley's net assets. On June 30, Yardley declared and paid a cash dividend of $60,000. On December 31, 2020, Yardley reported net income of $120,000 for the year. At this time, the shares had a fair value of $23. Santos's year-end is December 31. Required: a. Assuming that Santos does not have any significant influence over Yarder, prepare all the 2020 entries relating to this investment using the FVTPL classification. b. Prepare all the 2020 entries relating to this investment if it was classified as cost due to no active markets. c. Prepare all the 2020 entries relating to this investment assuming that Santos has significant influence over Yarder. Santos uses the equity method of accounting. (Ctrl) -
On January 1, 2020, Pail Corporation acquired 75 percent of Sand Company's common stock for $525,000 cash. The fair value of the noncontrolling interest at that date was determined to be $175,000. For the year ended December 31, 2020 Pail reported Dividends of $11000 on its general ledger. Sand reported Dividends of $14000 on its general ledger. What amount of DIVIDENDS would be reported on the 12/31/20 consolidated Statement of Retained Earnings? BE SURE TO TYPE A SIMPLE NUMBER WITH NO COMMAS OR DOLLAR SIGNS. FOR EXAMPLE, TYPE 1000 INSTEAD OF $1,000.
On January 2, 2021, Howdy Doody Corporation purchased 15% of Ranger Corporation's common stock for $80,000. During 2021, Ranger had net income of $120,000 and declared and paid a dividend of $40,000. On December 31, 2021, the fair value of the Ranger stock owned by Howdy Doody had increased to $90,000. How much should Howdy Doody show in the 2021 income statement as income from this investment? Answer: $
On July 1, 2020, Allen Corporation purchased 30% of the 84,000 outstanding common shares of Towne Corporation at $17 per share as a long-term investment. On the date of purchase, the book value and the fair value of the net assets of Towne Corporation were equal. Towne Corporation paid cash dividends of $22,400 on December 30, 2020, to shareholders on record. During the year, Towne Corporation reported net income of $67,200. As of December 31, 2020, common shares of Towne Corporation were trading at $20 per share. a. Record Allen’s entries in 2020 assuming that Allen Corporation had significant influence over Towne Corporation.
On January 2, 2021, Normal Inc. acquired 15% interest in Laco Co. by paying 1,500, 000 for 7,500 ordinary shares. On this date, the net assets of Laco Co. totaled P9 million. The investment was classified as a financial asset at fair value through other comprehensive income. The fair values Laco Co.'s identifiable assets and liabilities approximate their book values. On August 1, 2021, Normal received dividends of P4 per share from Laco Co. Fair value of the stocks on December 31, 2021 was P190. Net income reported by Laco for the year ended amounted to P1,500,000. On July 1, 2022, Normal Inc. paid P1 million to purchase 5,000 additional shares of Laco Co. from another shareholder. On this date the fair value of the net assets exceeds carrying value by 500, 000 attributable to depreciable asset with estimated remaining life of 5 years. On February 1, 2022, cash dividends of P5 were received while dividends of P6 were received on August 1, 2022. Net income reported for the year ended…
On July 1, 2019, Jude Company purchased 10,000 shares of Rigby Companyordinary shares for P510,000 plus broker's fees of P5,100. The shares represented25% of the outstanding shares of Rigby and Jude has an ability to exercisesignificant Influence over the financial and operating policies of Rigby. Theacquisition cost reflected book value of the investee's net assets as of that date.Rigby reported profit of P850,000 (evenly earned) for the year ended December31, 2019. At December 31, 2019, Rigby declared and paid cash dividends ofP320,000.At January 1, 2020, Jude Company sold one-half of the investment in Rigby forP275,000 less broker's fees of P2,750. Jude Company does not have the intentionto dispose the remaining securities in the immediate future. For the year endedDecember 31, 2020, Rigby reported profit of P980,000 and declared and paid cashdividends of P450.000.Market values per share of Rigby ordinary shares were as follows:December 31, 2019 - P55December 31, 2020 - P49 How…
On January 1, 2019, Spring Co. purchased a 25% interest in Fall Inc. for $500,000. For the year ended December 31, 2019, Fall reported net income from operations of $65,000 and a loss from discontinued operations of $10,000 (net of tax). Fall paid dividends of $11,500 on December 31, 2019. Assume that Spring uses the equity method to account for its investment in Fall. Which of the following is the amount that would be reported on Spring's 2019 income statement relating to Fall? Multiple Choice Investment income of $13,750. Dividend revenue of $2,875. Investment income of $16,250 and investment loss, discontinued operations of $2,500. Investment income of $13,750 and investment loss, discontinued operations of $2,500.
On January 1, 2020, Red Company purchased 80% of the common stock of Al-Yasa Company by issuing 10,000 shares of its (AI-Maha) OMR15 par value common stock with a market price of OMR25 per share. Al-Naba incurred cash expenses of OMR 8,000 for registering and issuing the common stock. The stockholders' equity sections of the two companies' balance sheets on December 31, 2019, were: Al-Yasa Al-Maha Common Stock, OMR15 par value OMR 350,000 OMR240,000 Other Contributed Capital 590,000 80,000 Retained Earnings 380,000 130,000 Required: A. Prepare the journal entry(s) on the books of Al- Maha Company to record the purchase of the common stock of Moon Company and related expenses. B. Prepare the elimination entry(s) required for the preparation of a consolidated balance sheet work paper on the date of acquisition.