Question
On January 1, 2017, Stream Company acquired 28 percent of the outstanding voting shares of Q-Video, Inc., for $692,000. Q-Video manufactures specialty cables for computer
On January 1, 2017, Stream Company acquired 28 percent of the outstanding voting shares of Q-Video, Inc., for $692,000. Q-Video manufactures specialty cables for computer monitors. On that date, Q-Video reported assets and liabilities with book values of $2.6 million and $718,000, respectively. A customer list compiled by Q-Video had an appraised value of $264,000, although it was not recorded on its books. The expected remaining life of the customer list was five 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 $246,000 in 2017 and a net loss of $104,000 in 2018. In each of these two years, Q-Video declared and paid a cash dividend of $16,000 to its stockholders.
During 2017, Q-Video sold inventory that had an original cost of $115,600 to Stream for $170,000. Of this balance, $85,000 was resold to outsiders during 2017, and the remainder was sold during 2018. In 2018, Q-Video sold inventory to Stream for $176,000. This inventory had cost only $132,000. Stream resold $106,000 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 _____
2018 Equity Loss
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