Question
Please use the information below to answer part A and B. Imani, Inc., buys 30 percent of ACC Company on January 1, 2021, for $1,000,000.
Please use the information below to answer part A and B. Imani, Inc., buys 30 percent of ACC Company on January 1, 2021, for $1,000,000. This acquisition gave Imani the ability to exercise significant influence over the investee. ACCs net assets on that date were $2,500,000. Any excess cost over the underlying book value was assigned to a copyright that was undervalued on ACCs balance sheet. This copyright has a remaining useful life of 10 years. Imani immediately begins supplying inventory to ACC as follows:
Year | Cost to Imani | Transfer Price | Amount Held by ACC at year-end (at transfer price) |
2021 | $ 84,000 | $120,000 | $ 54,000 |
2022 | 135,000 | 180,000 | 63,000 |
ACC reports net income of $400,000 in 2021 and $450,000 in 2022, additionally ACC declares and pays $40,000 in dividends each year. A. What is the equity income in ACC to be reported by Imani in 2021?
B. What amount should Imani report as its Investment in ACC on its December 31, 2022, balance sheet?
THE ABOVE INFORMATION WAS ALL THAT WAS GIVEN. Please show work and highlight answer. PLEASE COMPLETE ALL PARTS AS IT IS A COMPOUNDING QUESTION and as part of Chegg's guidelines, compounding questions must be answered up to 4 parts.
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