Company A purchased a certain number of Company B's outstanding voting shares at $28 per share as a long-term investment Company B had outstanding 42,000 shares of $14 par value stock. Complete the following table relating to the measurement and reporting by Company A after acquisition of the shares of Company stock. Required: a. What level of ownership by Company A of Company B is required to apply the method? b. What events should cause Company A to recognize revenue related to the investment in Company B? c. After the acquisition date, how should Company A change the balance of the investment account with respect to the stock owned in Company B (other than for the disposal of the investments)? Additional information: Net income reported by Company B in the first year Dividends declared by Company B in the first year Market price of Company B stock at the end of the first year $ 72,000 $ 25,000 $ 25 per share d. At acquisition, the investment account on the books of Company A should be debited for what amount? e. What is the balance in the investment account on the balance sheet of Company A at the end of the first year? f. What amount of revenue from the investment in Company B should Company A report at the end of the first year?
Company A purchased a certain number of Company B's outstanding voting shares at $28 per share as a long-term investment Company B had outstanding 42,000 shares of $14 par value stock. Complete the following table relating to the measurement and reporting by Company A after acquisition of the shares of Company stock. Required: a. What level of ownership by Company A of Company B is required to apply the method? b. What events should cause Company A to recognize revenue related to the investment in Company B? c. After the acquisition date, how should Company A change the balance of the investment account with respect to the stock owned in Company B (other than for the disposal of the investments)? Additional information: Net income reported by Company B in the first year Dividends declared by Company B in the first year Market price of Company B stock at the end of the first year $ 72,000 $ 25,000 $ 25 per share d. At acquisition, the investment account on the books of Company A should be debited for what amount? e. What is the balance in the investment account on the balance sheet of Company A at the end of the first year? f. What amount of revenue from the investment in Company B should Company A report at the end of the first year?
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
ChapterA2: Investments
Section: Chapter Questions
Problem 25E
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