Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Haystack, Inc. owns 30% of the outstanding stock of Hallmark, Inc. and accordingly uses the equity method to account for its investment. The stock was

Haystack, Inc. owns 30% of the outstanding stock of Hallmark, Inc. and accordingly uses the equity method to account for its investment. The stock was purchased on January 1, 2013 for $780,000. During the year ended December 31, 2013, Hallmark, Inc. reported the following:

Dividends declared and paid $ 400,000

Net income 2,400,000

Haystack, Inc. uses the FIFO method for costing its inventories, while Hallmark, Inc. uses the LIFO method to conform to other companies in its industry. Haystack, Inc. determines that if Hallmark, Inc. had used the FIFO method, its income would have been $350,000 higher during 2013. 

What is the balance in the Investment in Hallmark, Inc. that will be reported on Haystack, Inc.'s balance sheet at December 31, 2013 assuming Haystack, Inc. follows U.S. GAAP for its external financial reporting?

Step by Step Solution

3.37 Rating (144 Votes )

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Reporting and Analysis

Authors: Flawrence Revsine, Daniel Collins, Bruce, Mittelstaedt, Leon

6th edition

9780077632182, 78025672, 77632184, 978-0078025679

More Books

Students also viewed these Accounting questions