Equity Method Investment On January 1, 2022, Ace Beverages purchases 40 percent of the stock of...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Equity Method Investment On January 1, 2022, Ace Beverages purchases 40 percent of the stock of an organic sports drink company, Sporty Inc., at a cost of $1,000,000 when Sporty's book value was $2,000,000. Ace has a significant influence over Sporty's operating and financial decisions. The excess of investment cost over book value is attributed entirely to goodwill, and there are no intercompany transactions between the two companies. Sporty reports the following income and dividends for 2022 through 2025: Income (Loss) Dividends $100,000 $5,000 (40,000) 25,000 2,000 80,000 20,000 2022 2023 2024 2025 Required a. Calculate the basis difference that is attributed to goodwill. $ b. Calculate the investment balance, reported on Ace's December 31, 2025, balance sheet. $ Equity Method Investment On January 1, 2022, Ace Beverages purchases 40 percent of the stock of an organic sports drink company, Sporty Inc., at a cost of $1,000,000 when Sporty's book value was $2,000,000. Ace has a significant influence over Sporty's operating and financial decisions. The excess of investment cost over book value is attributed entirely to goodwill, and there are no intercompany transactions between the two companies. Sporty reports the following income and dividends for 2022 through 2025: Income (Loss) Dividends $100,000 $5,000 (40,000) 25,000 2,000 80,000 20,000 2022 2023 2024 2025 Required a. Calculate the basis difference that is attributed to goodwill. $ b. Calculate the investment balance, reported on Ace's December 31, 2025, balance sheet. $
Expert Answer:
Answer rating: 100% (QA)
a The basis difference that is attributed to goodwill can be calculated as follows Investment cost 1... View the full answer
Related Book For
Advanced Accounting
ISBN: 978-0077431808
10th edition
Authors: Joe Hoyle, Thomas Schaefer, Timothy Doupnik
Posted Date:
Students also viewed these accounting questions
-
A shareholder purchases 30 percent of the stock of an S corporation two-thirds of the way through the year for $20,000. The S corporation incurs an operating loss of $300,000 for the year. What is...
-
On January 1, Company P purchased 40 percent of the voting stock of Company S for $600,000 cash. Company P exercises significant influence over Company S. During the year, Company S had net income of...
-
Winston Corporation purchased 40 percent of the stock of Fullbright Company on January 1, 20X2, at underlying book value. The companies reported the following operating results and dividend payments...
-
Count Dracula, the most famous vampire, rumored to have killed at least 200,000 people, was based on a real person who lived in eastern Europe about 600 years ago. He was indeed a "monster," although...
-
What three ways can a manager increase the return on investment?
-
At December 31, 2014, certain accounts included in the Noncurrent Operating Assets section of Salvino Company's balance sheet had the following balances: Land . . . . . . . . . . . . . . . . . . . ....
-
Josie Corporation issued 10 -year, \(8 \%\) interest-bearing bonds payable at face value for \(\$ 10,000\) on January 1 , 2020. At that time, Josie Corporation elected to account for the bonds...
-
1. Is there a difference between aggressive accounting and earnings management? Would the motivation for using the techniques described in this case influence whether they should be labeled as...
-
Problem 10-6 Athena Investment Company is considering the purchase of an office property. After a careful review of the market and the leases that are in place, Athena believes that next year's cash...
-
Alex Vera organized Succulent Express at the beginning of February 20Y4. During February, Succulent Express entered into the following transactions: a. Terry Mason invested $30,000 in Succulent...
-
Chester Corporation's stock is currently paying a dividend of $2 per share. Dividends are expected to grow at a constant rate of 5% and the stock's beta is 1 . 4. The return on the market is 12%,...
-
1. The distance between two cities is 239 miles. If you travel at a speed of 74 mph, how long would it take you to go from one city to another? 2. You can travel from one city to another in 2 hours...
-
Consider the following table: Scenario Severe recession Mild recession Normal growth Boom Required: Probability Stock Fund Rate of Return Bond Fund Rate of Return 0.10 -34% -9% 0.20 0.30 0.40 -20.0%...
-
Investigate the molecular basis of antibiotic resistance in bacterial populations, considering both horizontal gene transfer and selective pressures driving the evolution of resistance mechanisms .
-
Download a company's Organizational Chart Discuss how the Organizational chart relates to its external environment, organizational size, technology, or strategy. Discuss how this information impacts...
-
Discuss the significance of co-evolution between plants and their pollinators, highlighting the intricate biochemical signaling mechanisms involved in plant-pollinator interactions .
-
Read below and respond to the question: What could have been done during the sample selection process to ensure the sample was representative of the population? What additional undesirable...
-
Swifty company is a publicly held corporation whose $1 par value stock is actively traded at $30 per share. The company issued 3400 shares of stock to acquire land recently advertised at $93000. When...
-
Moxie Corporation incurs research and development costs of $500,000 in 2011, 30 percent of which relates to development activities subsequent to certain criteria having been met that suggest that an...
-
Boswell and Johnson form a partnership on May 1, 2009. Boswell contributes cash of $50,000; Johnson conveys title to the following properties to the partnership: The partners agree to start their...
-
Under what circumstances might it be acceptable for a company preparing IFRS financial statements to follow an accounting treatment developed by the FASB?
-
Question: A police department supplied its officers with pagers for text-messaging. The department did not have an official policy on text-messaging, but its e-mail policy stated that: "The use of...
-
Question: In 1572, during the reign of Queen Elizabeth I of England, a patent application was filed for a knife with a bone handle rather than a wooden one. Would this patent be granted under current...
-
Question: Craigslist, Inc., runs a Web site for classified ads, including ads for the sale and rental of houses and apartments. Some of the posted ads were discriminatory (although not consistent),...
Study smarter with the SolutionInn App