Question
On January 1, 20x1, Penn Co. acquired 30 percent of the common shares of Senn Co. for $150,000 cash. Senn Co reported net income of
On January 1, 20x1, Penn Co. acquired 30 percent of the common shares of Senn Co. for $150,000 cash. Senn Co reported net income of $80,000 and paid dividends of $40,000 for both 20x1 and 20x2. The fair value of shares of Senn Co. held by Penn Co. was $165,000 and $154,000 on December 31, 20x1 and 20x2.
1- Based on the information, what amount will be reported by Penn Co. as income from its investment in Senn Co. for 20x2, if it used the equity method of accounting? (xx,xxx)
2- Based on the information, what amount will be reported by Penn Co. as balance in investment in Senn Co. on December 31, 20x2, if it used the equity method of accounting? (xx,xxx)
3- If instead, Penn Co. could not exercise significant influence over the investee, by what amount will Poke's 20x1 income increase due to its investment in Senn Co.?
4- If Penn Co could not exercise significant influence over the investee, by what amount will Penn Co.s 20x2 income increase due to its investment in Senn Co.?
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