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On December 3 1 , 2 0 1 9 , Akron, Inc., purchased 5 percent of Zip Company's common shares on the open market in

On December 31,2019, Akron, Inc., purchased 5 percent of Zip Company's common shares on the
open market in exchange for $16,250. On December 31,2020, Akron, Inc., acquires an additional 25
percent of Zip Company's outstanding common stock for $95,000.
During the next two years, the following information is available for Zip Company:
At December 31,2020, Zip reports a net book value of $294,000. Akron attributed any excess of its
30 percent share of Zip's fair over book value to its share of Zip's franchise agreements. The
franchise agreements had a remaining life of 10 years at December 31,2020.
a. Assume Akron applies the equity method to its Investment in Zip account:
What amount of equity income should Akron report for 2021?
On Akron's December 31,2021, balance sheet, what amount is reported for the Investment in
Zip account?
b. Assume Akron uses fair-value accounting for its Investment in Zip account:
What amount of income from its investment in Zip should Akron report for 2021?
On Akron's December 31,2021, balance sheet, what amount is reported for the Investment in
Zip account?
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