Question
Question 3SantaCompany purchased 2,000 of the 10,000 outstanding shares of Elves Companyscommon stock for $60,000 on January 1, 2010. During 2010, Elves Companyreporteda dividend of
Question 3SantaCompany purchased 2,000 of the 10,000 outstanding shares of Elves Companyscommon stock for $60,000 on January 1, 2010. During 2010, Elves Companyreporteda dividend of $5 per share and net income of $75,000. At the end of 2010 the market value of a share of Elves Companysstock has increased to $32 per share.(a) If Santa Company accounts for the investment as a minority, passiveand classifies the investment as an available-for-saleinvestment, then SantaCompanywill recognize what amount of 2010 income from the investmentthat contributes to net income?(b) If Santa Company accounts for the investment as a minority, passiveinvestment and classifies it as an available-for-salesecurity, then the investment will appear in the December 31, 2010 balance sheet at what amount?(c) If Santa Company accounts for the investment as a minority, activeinvestment and uses the equity method to account for the investment, then Santa Company will recognize what amount of 2010 income from the investment that contributes to net income? (d) If SantaCompany accounts for the investment as a minority, activeinvestment and uses the equity method to account for the investment, then the investment will appear in the December 31, 2010 balance sheet at what amount?
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