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On December 31, Year 2, HABS Inc. sold equipment to NORD at its fair value of $2,000,000 and recorded a gain of $500,000. This was
On December 31, Year 2, HABS Inc. sold equipment to NORD at its fair value of $2,000,000 and recorded a gain of $500,000. This was HABS's only income (other than any investment income from NORD) during the year. NORD reported income (other than any investment income from HABS) of $200,000 for Year 2. Both companies paid dividends of $100,000 during Year 2. Required: (a) Calculate NORD's income before taxes for Year 2 assuming that: (Enter your answers in thousands of dollars. Omit $ sign in your response.) (i) HABS and NORD are not related; Income before taxes (ii) NORD owns 75% of HABS and reports its investment in HABS on a consolidated basis; Income before taxes (iii) NORD owns 75% of HABS and reports its investment in HABS using the equity method; Income before taxes $ (iv) NORD owns 75% of HABS and reports its investment in HABS using the cost method. Income before taxes (b) Calculate HABS's income before taxes for Year 2 assuming that: (Enter your answers in thousands of dollars. Omit $ sign in your response.) (i) NORD and HABS are not related; Income before taxes $ (ii) HABS owns 75% of NORD and reports its investment in NORD on a consolidated basis; Income before taxes $ (iii) HABS owns 75% of NORD and reports its investment in NORD using the equity method; Income before taxes $ (iv) HABS owns 75% of NORD and reports its investment in NORD using the cost method. Income before taxes $ (c) Not available in Connect
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