Question
Anderson acquires 10 percent of the outstanding voting shares of Barringer on January 1, 2013, for $109,400 and categorizes the investment as an available-for-sale security.
Anderson acquires 10 percent of the outstanding voting shares of Barringer on January 1, 2013, for $109,400 and categorizes the investment as an available-for-sale security. An additional 20 percent of the stock is purchased on January 1, 2014, for $259,200, which gives Anderson the ability to significantly influence Barringer. Barringer has a book value of $950,000 at January 1, 2013, and records net income of $186,000 for that year. Barringer declared and paid dividends of $20,000 during 2013. 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, 2013. |
Barringer reported $238,200 of net income during 2014 and $258,200 in 2015. Dividends of $62,000 are declared and paid in each of these years. Anderson uses the equity method. |
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