Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Q8 Assume an investee has the following financial statement information for the three years ending December 31, 2019: (At December 31) 2019 2018 2017 Current

Q8

Assume an investee has the following financial statement information for the three years ending December 31, 2019:

(At December 31) 2019 2018 2017
Current assets $285,000 $277,500 $207,000
Tangible fixed assets 662,500 575,000 563,000
Intangible assets 40,000 75,000 50,000
Total assets $987,500 $897,500 $820,000
Current liabilities $120,000 $110,000 $100,000
Noncurrent liabilities 266,250 242,500 220,000
Common stock 100,000 100,000 100,000
Additional paid-in capital 100,000 100,000 100,000
Retained earnings 400,000 345,000 300,000
Stockholders' equity 600,000 545,000 500,000
Total liabilities and equity $986,250 $897,500 $820,000

(For the years ended December 31) 2019 2018 2017
Revenues $970,000 $920,000 $850,000
Expenses 875,000 840,000 775,000
Net income $95,000 $80,000 $75,000
Dividends $40,000 $35,000 $25,000

Assume that on January 1, 2017, an investor company purchased 100% of the outstanding voting common stock of the investee. On the date of the acquisition, the investees identifiable net assets had fair values that approximated their historical book values. In addition, the acquisition resulted in no goodwill or bargain purchase gain recognized in the consolidated financial statements of the investor company. Assuming that the investor company uses the cost method to account for its investment in the investee, what is the balance in the income from investee account in the investor companys pre- consolidation income statement for the year ended December 31, 2019?

$40,000

$95,000

$75,000

$55,000

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

World Class Internal Audit Tales From My Journey

Authors: Norman Marks

1st Edition

1500791962, 978-1500791964

More Books

Students also viewed these Accounting questions

Question

6. Identify characteristics of whiteness.

Answered: 1 week ago

Question

9. Explain the relationship between identity and communication.

Answered: 1 week ago