An investor company owns 40% of the outstanding common stock of an investee company, which allows the investor to exercise significant influence over the investee. The Equity Investment was reported at$1,050,000 as of the end of the previous year. During the year, the investor received dividends of $110,000 from the investee. The investee reports the following income statement for the year:RevenuesExpenses$2,700,0001,800,000900,000100,000Comprehensive income$1,000,000a. How much equity income should the investor report in its net income (i.e., as part of the current year income statement)?Net incomeOther comprehensive income$0b. What amount should the investor report for the Equity Investment in its balance sheet at the end of the year?$0

As per the equity method an investment is to be recognised at cost on initial recognition.

Answered: An investor company owns 40% of the…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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A corporation using the equity method of accounting for its investment in a 80%–owned investee, which earned $20,000 and paid $5,000 in dividends What is the ending balance of investment on 31/12 if investment in 1/1 amount 100,000$ ? Select one: a. 112,000 b. 115,000 c. 120,000 d. 100,00
James Corporation earned net income of $90,000 this year. The company began the year with 600 shares of common stock and issued 500 more on April 1. They issued $5,000 in preferred dividends for the year. What is the EPS for the year for James (rounded to the nearest dollar)?
On january 1, christian company showed total assets of 5,000,000, total liabilities of 2 million and contributed capital of 2 million. during the current year, the entity issued share capital of 500,000 par value at a premium of 300,000. dividend of 250,000 was paid on december 31. on december 31, total assets amounted to 7500000 And total liabilities amounted to 3200000. what amount was reported as net income for the current year ? A. 1,750,000 B. 1 million C. 750,000 D. 500,000
During the year, Cellular Land, Inc. issued 1,500 shares of its $0.50 stated value common stock for $15 per share, and declared and paid cash dividends totaling $0.25 per share. By what amount does contributed capital increase as a result of these events? $22,500 $750 $21,750 $22,125
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Thelma and Louie, Inc. started the year with a balance of retained earnings of $545 million and ended the year with retained earnings of $590 million. The company paid dividends of $35 million to the preferred stockholders and $75 million to common stockholders. Calculate Thelma and Louie’s net income for the year.
The following transactions occurred last year at Jost Company: Issuance of shares of the company's own common stock $170,00o; Dividends paid to the company's own shareholders $7,000; Dividends received from investments in other companies' shares $4,000; Interest paid on the company's own bonds $11,000; Repayment of principal on the company's own bonds $40,000; Proceeds from sale of the company's used equipment $23,000; Purchase of land $120,00. Based solely on the above information, the net cash provided by financing activities for the year on the statement of cash flows would be: $112,000 $123,000 $375,000 $19,000
You are considering an investment in Roxie's Bed & Breakfast Corporation During the last year, the firm's income statement listed an addition to retained earnings of $16.20 million and common stock dividends of $1.30 million. Roxie's year-end balance sheet shows common stockholders' equity of $55.9 million with 19 million shares of common stock outstanding. The common stock's market price per share was $8.10.
Pronghorn Co. invested $1,070,000 in Stellar Co. for 25% of its outstanding stock. Stellar Co. pays out 30% of net income in dividene each year. Use the information in the following T-account for the investment in Stellar to answer the following questions. Investment in Stellar Co. 1,070,000 99,000 (a) How much was Pronghorn Co.'s share of Stellar Co's net income for the year? Net income 29,700 Total net income (b) What was Stellar Co's total net income for the year? 428000 Total Dividends. $ 396000 (c) What was Stellar Co's total dividends for the year? 128400
At the beginning of the year, paid-in capital was $164 and retained earnings were $94. During the year, the shareholders invested $48 and dividends of $12 were declared and paid. Retained earnings at the end of the year were $104. Net income for the year was: A.$20 B. $22 C. $30 D. $40
West Asset Management Inc. purchased a stock at $78.26 per share at the beginning of the year and held the stock for one year. At the end of the year, West Asset Management sold all of its holdings for this stock at $83.26 per share and received a dividend of $4.25 per share. What was West Asset Management’s total investment return for this stock in the holding period? A. 6.39% B. 15.64% C. 11.82% D. 5.43%

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