Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Acker Inc. bought 40% of Howell Co. on January 1, 2010 for $576,000. The equity method of accounting was used. The book value and fair

Acker Inc. bought 40% of Howell Co. on January 1, 2010 for $576,000. The equity method of accounting was used. The book value and fair value of the net assets of Howell on that date were $1,440,000. Acker began supplying inventory to Howell as follows:

YEAR/ COST TO ACKER/ TRANSFER PRICE/ AMOUNT HELD BY HOWELL AT YEAR-END:

2010/ $55,000/ $75,000/ $15,000

2011/ $70,000/ $110,000/ $55,000

Howell reported net income of $100,000 in 2010 and $120,000 in 2011 while paying $40,000 in dividends each year.

QUESTIONS & ANSWER. PLEASE EXPLAIN AND SHOW WORK. ALL ANSWERS ARE CORRECT SO PLEASE DONT STATE OTHERWISE. THANK YOU.

What is the amount of unrealized intra-entity inventory profit to be deferred on December 31, 2010?

ANSWER: $1,600

What is the Equity in Howell Income that should be reported by Acker in 2010?

ANSWER: 38,400

What is the balance in Acker's Investment in Howell account at December 31, 2010?

ANSWER: 598,400

Step by Step Solution

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

The Audit Guide For Beginners Understanding Fiduciary Responsibilities

Authors: Oren Rohleder

1st Edition

B0B1M56DMY, 979-8829314019

More Books

Students also viewed these Accounting questions