Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Orange Company owns 2 0 % of Blue Company, and accounts for its investment using the equity method. On the date of acquisition, the fair

Orange Company owns 20% of Blue Company, and accounts for its investment using the equity method. On the date of acquisition, the fair values of Blue's net assets equaled book values. At the beginning of 2XX1, the Equity Investment was reported on Orange's balance sheet at $2,400,000. During 2XX1, Blue reported net income of $600,000 and paid dividends of $360,000. During 2XX2, Blue reported net income of $900,000 and paid dividends of $200,000, In 2XX1, Orange sold inventory to Blue, realizing a gross profit of $240,000 on the sale. At the end of 2XX1,25% of the inventory remained unsold by Blue. In 2XX2, Blue sells the inventory from the 2XX1 intercompany transaction to an unaffiliated party. Provide Equity Income ending balance in Equity Investment for both years.
2XX12XX2
Equity Income 0 $
Equity Investmwnt 0$

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Principles Of Auditing And Other Assurance Services

Authors: Ray Whittington, Kurt Pany

18th Edition

0077486277, 978-0077486273

More Books

Students also viewed these Accounting questions