Question 4 Not yet answered Marked out of 1.00 P Flag question Assume an investee has the following financial statement information for the three years ending December 31, 2013: (At December 31) 2011 2012 2013 Current assets $517,500 $694,250 $713,675 Tangible fixed assets 1,407,500 1,435,750 1,654,325 Intangible assets 125,000 112,500 100,000 Total assets $2,050,000 $2,242,500 $2,468,000 Current liabilities $250,000 $275,000 $302,500 Noncurrent liabilities 550,000 605,000 665,500 Common stock 250,000 250,000 250,000 Additional paid-in capital 250,000 250,000 250,000 Retained earnings 750,000 862,500 1,000,000 Total liabilities and equity $2,050,000 $2,242,500 $2,468,000 (At December 31) Revenues Expenses Net income Dividends 2011 2012 2013 $2,125,000 $2,300,000 $2,425,000 1,937,500 2,100,000 2,190,000 $187,500 $200,000 $ 235,000 $62,500 $ 87,500 $97,500 Review of pre-consolidation cost method (controlling investment in affiliate, fair value equals book value) Assume that on January 1, 2011, an investor company purchased 100% of the outstanding voting common stock of the investee. On the date of the acquisition, the investee's 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 "investment in investee" account in the investor company's preconsolidation balance sheet on December 31, 2013? $1,125,000 $1,250,000 $1,500,000 $2,468,000 Question 4 Not yet answered Marked out of 1.00 P Flag question Assume an investee has the following financial statement information for the three years ending December 31, 2013: (At December 31) 2011 2012 2013 Current assets $517,500 $694,250 $713,675 Tangible fixed assets 1,407,500 1,435,750 1,654,325 Intangible assets 125,000 112,500 100,000 Total assets $2,050,000 $2,242,500 $2,468,000 Current liabilities $250,000 $275,000 $302,500 Noncurrent liabilities 550,000 605,000 665,500 Common stock 250,000 250,000 250,000 Additional paid-in capital 250,000 250,000 250,000 Retained earnings 750,000 862,500 1,000,000 Total liabilities and equity $2,050,000 $2,242,500 $2,468,000 (At December 31) Revenues Expenses Net income Dividends 2011 2012 2013 $2,125,000 $2,300,000 $2,425,000 1,937,500 2,100,000 2,190,000 $187,500 $200,000 $ 235,000 $62,500 $ 87,500 $97,500 Review of pre-consolidation cost method (controlling investment in affiliate, fair value equals book value) Assume that on January 1, 2011, an investor company purchased 100% of the outstanding voting common stock of the investee. On the date of the acquisition, the investee's 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 "investment in investee" account in the investor company's preconsolidation balance sheet on December 31, 2013? $1,125,000 $1,250,000 $1,500,000 $2,468,000
