Question
On January 1, 2017, Stream Company acquired 20 percent of the outstanding voting shares of Q-Video, Inc., for $702,000. Q-Video manufactures specialty cables for computer
On January 1, 2017, Stream Company acquired 20 percent of the outstanding voting shares of Q-Video, Inc., for $702,000. Q-Video manufactures specialty cables for computer monitors. On that date, Q-Video reported assets and liabilities with book values of $2.0 million and $746,000, respectively. A customer list compiled by Q-Video had an appraised value of $330,000, although it was not recorded on its books. The expected remaining life of the customer list was 20 years with a straight-line amortization deemed appropriate. Any remaining excess cost was not identifiable with any particular asset and thus was considered goodwill.
Q-Video generated net income of $208,000 in 2017 and a net loss of $84,000 in 2018. In each of these two years, Q-Video declared and paid a cash dividend of $10,000 to its stockholders.
During 2017, Q-Video sold inventory that had an original cost of $92,040 to Stream for $156,000. Of this balance, $78,000 was resold to outsiders during 2017, and the remainder was sold during 2018. In 2018, Q-Video sold inventory to Stream for $184,000. This inventory had cost only $138,000. Stream resold $98,000 of the inventory during 2018 and the rest during 2019.
For 2017 and then for 2018, compute the amount that Stream should report as income from its investment in Q-Video in its external financial statements under the equity method. (Enter your answers in whole dollars and not in millions. Do not round intermediate calculations.)
2017 Equity Income of __________
2018 Equity Loss of _____________
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