E16-7 Precision Automotive Parts paid $145,000 for a 40% investment in the common stock of Auto Chief,

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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?

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Accounting

ISBN: 9780130906991

5th Edition

Authors: Charles T. Horngren, Walter T. Harrison, Linda S. Bamber, Betsy Willis, Becky Jones

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