Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Problem 1 On January 2, 2020, Pond Co. acquired 40% of the outstanding voting common shares of Ramp Co. for $700,000. On that date,

image text in transcribed

Problem 1 On January 2, 2020, Pond Co. acquired 40% of the outstanding voting common shares of Ramp Co. for $700,000. On that date, Ramp reported assets and liabilities with book values of $2.2 million and $700,000, respectively. A building owned by Ramp had an appraised value of $300,000, although it had a book value of only $120,000. This building had a 12-year remaining life and no salvage value. It was being depreciated on the straight-line basis. Ramp generated net income of $300,000 in 2020 and a loss of $120,000 in 2021. In each of these two years, Ramp paid a cash dividend of $70,000 to its stockholders. During 2020, Ramp sold inventory to Pond that had an original cost of $60,000. The merchandise was sold to Pond for $96,000. Of this balance, $72,000 was resold to outsiders during 2020 and the remainder was sold during 2021. In 2021, Ramp sold inventory to Pond for $180,000. This inventory had cost only $108,000. Pond resold $120,000 of the inventory during 2021 and the rest during 2022. Required: For 2020 and then for 2021, calculate the equity income to be reported by Pond for external reporting purposes.

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

Modern Advanced Accounting In Canada

Authors: Hilton Murray, Herauf Darrell

7th Edition

1259066487, 978-1259066481

More Books

Students also viewed these Accounting questions