Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

On December 31, 2016, Akron, Inc. purchased 5 Percent of Zip Company's common shares on the open market in exchange for $16,800. On December 31,

On December 31, 2016, Akron, Inc. purchased 5 Percent of Zip Company's common shares on the open market in exchange for $16,800. On December 31, 2017, Akron, Inc., acquires an additional 25 percent of Zip Company's outstanding common stock for $97,000. During the next two years, the following information is available for Zip Company:

Income Dividends Declared Common Stock Fair Value (12/31)
2016 $324,000
2017 $70,000 $7,100 388,000
2018 82,000 14,200 481,000

At December 31, 2017, Zip reports a net book value of $288,000. 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, 2017.

  1. Assume Akron applies the equity method to its Investment in Zip account a) What amount of equity income should Akron report for 2018? b) On Akron's December 31, 2018, balance sheet, what amount is reported for the Investment in Zip account?

  1. Assume Akron uses fair-value accounting for its Investment in Zip account:

a. What amount of income from its investment in Zip should Akron report for 2018?

b. On Akron's December 31, 2018, balance sheet, what amount is reported for the Investment in Zip account?

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

DOD Financial Management The Army Faces Significant Challenges In Achieving Audit Readiness For Its Military Pay

Authors: Government Accountability Office

1st Edition

1492310921, 978-1492310921

More Books

Students also viewed these Accounting questions