Japanese companies tend to belong to groups (keiretsu) and hold shares of one another. Because these...

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Japanese companies tend to belong to groups ("keiretsu") and hold shares of one another. Because these cross-holdings are minority interests, they tend not to be consolidated in published financial statements. See the following information for Company A and Company B: Company A owns 20% of Company B; the initial investment was 20 billion yen. Company B owns 30% of Company A; the initial investment was 20 billion yen. Both companies value their minority interests at historical cost. The year-end nonconsolidated balance sheets of the two companies follow: Company A Company B BALANCE SHEET (Yen Billion) (Yen Billion) Current Assets 70 120 Fixed Assets 70 150 Minority Investments 10 10 Total Assets 150 280 Debt Shareholder Equity Total Liabilitities 50 80 100 200 150 280 The annual net income of Company A was 15 billion yen. The annual net income of Company B was 40 billion yen. Assume that the two companies do not pay any dividends. The current stock market values are 250 billion yen for Company A and 550 billion yen for Company B. Select the earnings of the two companies, calculated by the equity method of consolidation: Company A: 23 billion; Company B: 52 billion Company A: 23 billion; Company B: 44.5 billion Company A: 15 billion; Company B: 40 billion Company A: 18 billion; Company B: 40 billion Japanese companies tend to belong to groups ("keiretsu") and hold shares of one another. Because these cross-holdings are minority interests, they tend not to be consolidated in published financial statements. See the following information for Company A and Company B: Company A owns 20% of Company B; the initial investment was 20 billion yen. Company B owns 30% of Company A; the initial investment was 20 billion yen. Both companies value their minority interests at historical cost. The year-end nonconsolidated balance sheets of the two companies follow: Company A Company B BALANCE SHEET (Yen Billion) (Yen Billion) Current Assets 70 120 Fixed Assets 70 150 Minority Investments 10 10 Total Assets 150 280 Debt Shareholder Equity Total Liabilitities 50 80 100 200 150 280 The annual net income of Company A was 15 billion yen. The annual net income of Company B was 40 billion yen. Assume that the two companies do not pay any dividends. The current stock market values are 250 billion yen for Company A and 550 billion yen for Company B. Select the earnings of the two companies, calculated by the equity method of consolidation: Company A: 23 billion; Company B: 52 billion Company A: 23 billion; Company B: 44.5 billion Company A: 15 billion; Company B: 40 billion Company A: 18 billion; Company B: 40 billion