Question
On January 1, Belleville Company paid $1,250,000 to acquire 62,500 shares of O'Fallons voting common stock, which represents a 40 percent investment. No allocations to
On January 1, Belleville Company paid $1,250,000 to acquire 62,500 shares of O'Fallons voting common stock, which represents a 40 percent investment. No allocations to goodwill or other specific accounts were made. Significant influence over O'Fallon is achieved by this acquisition, and so Belleville applies the equity method. O'Fallon declared a $2 per share dividend during the year and reported net income of $610,000. What is the balance in the Investment in O'Fallon account found in Bellevilles financial records as of December 31?
Jubilee, Inc., owns 40 percent of JPW Company and applies the equity method. During the current year, Jubilee buys inventory costing $137,600 and then sells it to JPW for $172,000. At the end of the year, JPW still holds only $29,500 of merchandise. What amount of gross profit must Jubilee defer in reporting this investment using the equity method?
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