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Sampson Financial paid $580,000 for a 25% investment in the common stock of Maverick, Inc. For the first year, Maverick reported net income of $210,000
Sampson Financial paid $580,000 for a 25% investment in the common stock of Maverick, Inc. For the first year, Maverick reported net income of $210,000 and at year-end declared and paid cash dividends of $145,000. On the balance-sheet date, the fair value of Sampson's investment in Maverick stock was $370,000 Requirements 1. Which method is appropriate for Sampson Financial to use in accounting for its investment in Maverick, Inc.? Why? 2. Show everything that Sampson would report for the investment and any investment revenue in its year-end financial statements. Requirement 1. Which method is appropriate for Sampson Financial to use in accounting for its investment in Maverick? Why? It would be appropriate for Sampson to use the equity With a holding of this size, 25% of the common stock, it is probable that Sampson can exercise significant influence on the operations of Maverick, Inc Requirement 2. Show everything that Sampson would report for the investment and any investment revenue in its year-end financial statements. method of recording its investment in Maverick, Inc. Balance Sheet (partial) Assets Long-term assets Equity method investment ncome Statement (partial): Other revenue: Equity method investment revenue
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