Gant Company purchased 30 percent of the outstanding shares of Temp Company for $77,000 on January 1, 20X6. The following results are reported for Temp Company: 20X6 20X7 20X8 Net income $ 44,000 $ 39,000 $ 53,000 Dividends paid 11,000 26,000 16,000 Fair value of shares held by Gant: January 1 77,000 96,000 93,000 December 31 96,000 93,000 104,000 Required: Determine the amounts reported by Gant as income from its investment in Temp for each year and the balance in Gant’s investment in Temp at the end of each year assuming that Gant uses the following options in accounting for its investment in Temp: Carries the investment at fair value. Uses the equity method.
Gant Company purchased 30 percent of the outstanding shares of Temp Company for $77,000 on January 1, 20X6. The following results are reported for Temp Company: 20X6 20X7 20X8 Net income $ 44,000 $ 39,000 $ 53,000 Dividends paid 11,000 26,000 16,000 Fair value of shares held by Gant: January 1 77,000 96,000 93,000 December 31 96,000 93,000 104,000 Required: Determine the amounts reported by Gant as income from its investment in Temp for each year and the balance in Gant’s investment in Temp at the end of each year assuming that Gant uses the following options in accounting for its investment in Temp: Carries the investment at fair value. Uses the equity method.
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
ChapterA2: Investments
Section: Chapter Questions
Problem 24E
Related questions
Question
Gant Company purchased 30 percent of the outstanding shares of Temp Company for $77,000 on January 1, 20X6. The following results are reported for Temp Company:
| 20X6 | 20X7 | 20X8 | |
|---|---|---|---|
| Net income | $ 44,000 | $ 39,000 | $ 53,000 |
| Dividends paid | 11,000 | 26,000 | 16,000 |
| Fair value of shares held by Gant: | |||
| January 1 | 77,000 | 96,000 | 93,000 |
| December 31 | 96,000 | 93,000 | 104,000 |
Required:
Determine the amounts reported by Gant as income from its investment in Temp for each year and the balance in Gant’s investment in Temp at the end of each year assuming that Gant uses the following options in accounting for its investment in Temp:
- Carries the investment at fair value.
- Uses the equity method.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps with 4 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Cornerstones of Financial Accounting
Accounting
ISBN:
9781337690881
Author:
Jay Rich, Jeff Jones
Publisher:
Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
Cornerstones of Financial Accounting
Accounting
ISBN:
9781337690881
Author:
Jay Rich, Jeff Jones
Publisher:
Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning