Question

Santa Company purchased 2,000 of the 10,000 outstanding shares of Elves Company’s common stock for $60,000...

Santa Company purchased 2,000 of the 10,000 outstanding shares of Elves Company’s common stock for $60,000 on January 1, 2010. During 2010, Elves Company reported a dividend of $5 per share and net income of $75,000. At the end of 2010 the market value of a share of Elves Company’s stock has increased to $32 per share.

(a) If Santa Company accounts for the investment as a minority, passive and classifies the investment as an available-for-sale investment, then Santa Company will recognize what amount of 2010 income from the investment that contributes to net income?

(b) If Santa Company accounts for the investment as a minority, passive investment and classifies it as an available-for-sale security, then the investment will appear in the December 31, 2010 balance sheet at what amount?

(c) If Santa Company accounts for the investment as a minority, active investment and uses the equity method to account for the investment, then Santa Company will recognize what amount of 2010 income from the investment that contributes to net income?

(d) If Santa Company accounts for the investment as a minority, active investment and uses the equity method to account for the investment, then the investment will appear in the December 31, 2010 balance sheet at what amount?

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1
December 31, 2010 Reporting in Available for sale Investment Equity method used for Investment
Requirement a Income Statement
Dividend Income 10000
(=5*2000)
Requirement c Income in equity 15000
(=75000*2000/10000)
Requirement b Balance Sheet
Asset side
Investment in shares of Elvis Company 64000
(=2000*32)
Equity side
Fair value adjustment 4000
(=2000*2)
Requirement d Asset side
Investment in shares of Elvis Company 65000
(=2000*30+75000*2000/10000-2000*5)
0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Pacer Company purchased 300 of the 1, 000 outstanding shares of Queen Company’s common stock for...
Pacer Company purchased 300 of the 1, 000 outstanding shares of Queen Company’s common stock for $80,000 on January 2, 2016. During 2017, Queen Company declared dividends of $8,000 and reported earnings for the year of $20,000. If Pacer Company uses the equity method of accounting for its investment in Queen Company, its Investment in Queen Company account at December 31, 2017 should be Refer to the facts below. If Pacer Company uses the lower of cost or market method...
During the first year of operations, Makala Company purchased two available-for-sale investments as follows: Security Shares...
During the first year of operations, Makala Company purchased two available-for-sale investments as follows: Security Shares Purchased Cost Oceanna Company 700 $29,000 Rockledge, Inc. 1,900 41,000 Assume that as of December 31, Oceanna Company’s stock had a market value of $49 per share and Rockledge, Inc.’s stock had a market value of $20 per share. Makala had 10,000 shares of no par stock outstanding that was issued for $150,000. For the year ending December 31, Makala had a net income...
On March 1, 2009, the Miranda Company purchased 2,000 shares of its common stock for $25...
On March 1, 2009, the Miranda Company purchased 2,000 shares of its common stock for $25 per share for the treasury. On July 1, 2009, 1,000 of the treasury shares were sold for $30 per share.  On October 1, 2009, 1,000 of the treasury shares were sold at $15 per share. On January 1, 2009, Miranda’s balance in Retained Earnings was $100,000. During the year, the company had net income of $20,000 and paid dividends of $5,000. 44. Refer to question...
On October 1, 2015, Para Company purchased 90% of the outstanding common stock of Star Company...
On October 1, 2015, Para Company purchased 90% of the outstanding common stock of Star Company for $202,700. Additional data concerning Star Company for 2015 follows: Common stock $65,500 Other contributed capital 28,700 Retained earnings, 1/1 76,100 Net income 57,000 Dividends declared and paid (12/15) 10,300 Any difference between book value and the value implied by the purchase price relates to goodwill. Para Company uses the partial equity method to record its investment in Star Company. (a) Prepare on Para...
1)Presents Inc. acquired all of the outstanding common stock of Santa Co. on January 1, 2017,...
1)Presents Inc. acquired all of the outstanding common stock of Santa Co. on January 1, 2017, for $257,000. Annual amortization of $19,000 resulted from this acquisition. Presents reported net income of $70,000 in 2017 and $50,000 in 2018 and paid $22,000 in dividends each year. Santa reported net income of $40,000 in 2017 and $47,000 in 2018 and paid $10,000 in dividends each year. On the consolidated financial statements for 2017, a)what amount should have been shown for Equity in...
1. Sweet Company’s outstanding stock consists of 1,600 shares of noncumulative 4% preferred stock with a...
1. Sweet Company’s outstanding stock consists of 1,600 shares of noncumulative 4% preferred stock with a $100 par value and 11,600 shares of common stock with a $10 par value. During the first three years of operation, the corporation declared and paid the following total cash dividends. Dividend Declared year 1 $ 3,600 year 2 $ 9,200 year 3 $ 40,000 The total amount of dividends paid to preferred and common shareholders over the three-year period is: Multiple Choice $19,200...
______ On January 2, 2021, Pod Company purchased 25% of the outstanding common stock of Jobs,...
______ On January 2, 2021, Pod Company purchased 25% of the outstanding common stock of Jobs, Inc. and subsequently used the equity method to account for the investment. During 2021, Jobs, Inc. reported net income of $420,000 and distributed dividends of $180,000. The ending balance in the investment account at December 31, 2021, was $320,000 after applying the equity method during 2021. What was the purchase price Pod Company paid for its investment in Jobs, Inc? a.   $ 80,000 b.  ...
On January 1, 2009, Halley Company acquired 15 percent of the outstanding common stock of Ghosh...
On January 1, 2009, Halley Company acquired 15 percent of the outstanding common stock of Ghosh Corporation for $650,000. Halley appropriately uses the cost method to account for its investment in Ghosh. Ghosh reported net income and paid dividends for the years ended 2009, 2010, and 2011, as follows: Year Net Income Dividends 2009 $100,000 $70,000 2010 $70,000 $70,000 2011 $30,000 $70,000 Based on the above information the amount of income related to its investment in Ghosh to be reported...
Part A On January 2, 2017, Kesha Company purchased 10,000 shares of the stock of Petty...
Part A On January 2, 2017, Kesha Company purchased 10,000 shares of the stock of Petty Corp., and did not obtain significant influence. The investment is intended as a long-term investment. The stock was purchased for $5 per share, and represents a 10% ownership stake. Petty Corp made $20,000 of net income in 2017, and paid dividends of $5,000 on December 15, 2017. On December 31, 2017, Petty Corp's stock was trading on the open market for $8 per share...
On January 1, 2020, Starchucks Corporation purchased 20,000 shares of Karfee, Inc. common stock for $30/share,...
On January 1, 2020, Starchucks Corporation purchased 20,000 shares of Karfee, Inc. common stock for $30/share, including brokerage commissions.   Karfee had 200,000 shares of common stock outstanding at the time Starchucks purchased its stock from another investor. Karfee common stock was trading at $33/share on December 31, 2020, and $26/share on December 31, 2021. Starchucks classifies its investment in Karfee as an available for sale investment.   December 31st is Starchucks’ fiscal year-end. Required (submit as a text entry and MUST...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT