Problem 1-26 (Algo) (LO 1-2, 1-4, 1-5) On December 31, 2019, Akron, Inc., purchased 5 percent of Zip Company's common shares on the open market in exchange for $17,400. On December 31, 2020, Akron, Inc., acquires an additional 25 percent of Zip Company's outstanding common stock for $93,500. During the next two years, the following information is available for Zip Company: Income 2019 2020 2021 Common Stock Dividends Fair Value Declared (12/31) $317,000 $6,800 374,000 14,600 474,000 $82,000 95,000 At December 31, 2020, Zip reports a net book value of $292,000. Akron attributed any excess of its 30 percent share of Zip's fair over book value to its share of Zip's franchise agreements. The franchise agreements had a remaining life of 10 years at December 31, 2020 a. Assume Akron applies the equity method to its Investment in Zip account: 1. What amount of equity income should Akron report for 2021? 2. On Akron's December 31, 2021, balance sheet, what amount is reported for the Investment in Zip account? b. Assume Akron uses fair-value accounting for its Investment in Zip account: 1. What amount of income from its investment in Zip should Akron report for 2021? 2. On Akron's December 31, 2021, balance sheet, what amount is reported for the Investment in Zip account? a1. Equity income a2. Investment in Zip account b1. Reported income b2. Investment in Zip account Problem 1-18 (Algo) (LO 1-2, 1-3, 1-4, 1-5, 1-6a) Milani, Inc., acquired 10 percent of Seida Corporation on January 1, 2020, for $188,000 and appropriately accounted for the investment using the fair-value method. On January 1, 2021, Milani purchased an additional 30 percent of Seida for $585,000 which resulted in significant influence over Seida. On that date, the fair value of Seida's common stock was $1,950,000 in total. Seida's January 1, 2021, book value equaled $1,800,000, although land was undervalued by $132,000. Any additional excess fair value over Seida's book value was attributable to a trademark with an eight-year remaining life. During 2021, Seida reported income of $314,000 and declared and paid dividends of $106,000. Prepare the 2021 journal entries for Milani related to its investment in Seida. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list 1 Record acquisition of Seida stock. > 2 Record the 40% income earned during period by Seida. 3 Record 2021 amortization for trademark excess fair value. 4 Record dividend declaration from Seida. 5 Record collection of dividend from investee. Credit Note : = journal entry has been entered Record entry clear entry View general journal
