Anderson acquires 10 percent of the outstanding voting shares of Barringer on January 1, 2009, for ($92,000)

Question:

Anderson acquires 10 percent of the outstanding voting shares of Barringer on January 1, 2009, for $$92,000$ and categorizes the investment as an available-for-sale security. An additional 20 percent of the stock is purchased on January 1, 2010, for $$210,000$, which gives Anderson the ability to significantly influence Barringer. Barringer has a book value of $$800,000$ at January 1, 2009, and records net income of $$180,000$ for that year. Barringer paid dividends of $$80,000$ during 2009. The book values of Barringer’s asset and liability accounts are considered as equal to fair values except for a copyright whose value accounted for Anderson’s excess cost in each purchase. The copyright had a remaining life of 16 years at January 1, 2009.

Barringer reported $$210,000$ of net income during 2010 and $$230,000$ in 2011. Dividends of $$100,000$ are paid in each of these years. Anderson uses the equity method.

a. On comparative income statements issued in 2011 by Anderson for 2009 and 2010, what amounts of income would be reported in connection with the company’s investment in Barringer?

b. If Anderson sells its entire investment in Barringer on January 1, 2012, for $$400,000$ cash, what is the impact on Anderson’s income?

c. Assume that Anderson sells inventory to Barringer during 2010 and 2011 as follows: image text in transcribed