E16-7 Precision Automotive Parts paid $145,000 for a 40% investment in the common stock of Auto Chief,
Question:
E16-7 Precision Automotive Parts paid $145,000 for a 40% investment in the common stock of Auto Chief, Inc. For the first year. Auto Chief reported net income of $84,000 and at year end declared and paid cash dividends of $16,000. On the balance sheet date, the market value of Precision's investment in Auto Chief stock was $134,000. Required 1. Which method is appropriate for Precision Automotive to use in accounting for its invest- ment in Auto Chief? Why? 2. Show everything that Precision would report for the investment and any investment rev- enue in its year-end financial statements. 3. What role does the market value of the investment play in this situation?
Step by Step Answer:
Accounting
ISBN: 9780130906991
5th Edition
Authors: Charles T. Horngren, Walter T. Harrison, Linda S. Bamber, Betsy Willis, Becky Jones