Great Inc. (Great) owns 100 % of Max Ltd. (Max). During the year, Max earned a net income of $40,000 and declared and paid dividends of $10,000. Assuming that Great uses the equity method, what effect would the above information have on Great's Investment in Max account? Multiple Choice An increase of $40,000. No effect. An increase of $10,000. An increase of $30,000.

Great Inc. (Great) owns 100 % of Max Ltd. (Max). During the year, Max earned a net income of $40,000 and declared and paid dividends of $10,000. Assuming that Great uses the equity method, what effect would the above information have on Great's Investment in Max account? Multiple Choice An increase of $40,000. No effect. An increase of $10,000. An increase of $30,000.

SWFT Comprehensive Vol 2020

43rd Edition

ISBN:9780357391723

Author:Maloney

Publisher:Maloney

Chapter22: S Corporations

Section: Chapter Questions

Problem 23CE

See similar textbooks

Similar questions

Scott Co. acquired a 30% interest in Roker, Inc. for $210,000 and appropriately applied the equity method. During the first year, Roker, Inc. reported net income of $125,000 and paid cash dividends totaling $25,000.What amount will Scott report as it relates to the investment at the end of the first year on its income statement? Select one: A. Investment earnings totaling $37,500 B. Investment earnings totaling $22,500 C. Receipt of dividends totaling $7,500 D. Net investment earnings totaling $75,000
Willard Co. acquired a 30% interest in Diltronics for $420,000 and appropriately applied the equity method. During the first year, Diltronics reported net income of $250,000 and paid cash dividends totaling $50,000. What amount will Willard report as it relates to the investment at the end of the first year on its income statement? Show the calculation used to get the answer Investment earnings totaling $75,000 Investment earnings totaling $45,000 Net investment earnings totaling $150,000 Receipt of dividends totaling $15,000
Ayayai Corporation purchased a 20% interest in Moss Inc. for $300. This investment gave Ayayai significant influence over Moss. During the year, Moss earned net income of $15 and paid dividends of $5. Assuming the purchase price was equal to 20% of Moss’s net carrying amount when it was acquired.Prepare Ayayai’s journal entries related to this investment using the equity method. Ayayai applies IFRS. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit enter an account title to record investment purchase enter a debit amount enter a credit amount enter an account title to record investment purchase enter a debit amount enter a credit amount (To record investment purchase) enter an account title to record investment income enter a debit amount enter a credit…
Fill in the dollar changes caused in the Investment account and Dividend Revenue or Investment Revenue account by each of the following transactions, assuming Nash's Company uses (a) the fair value method and (b) the equity method for accounting for its investments in Swifty Company. 1. At the beginning of Year 1, Nash's bought 30% of Swifty's common stock at its book value. Total book value of all Swifty's common stock was $720,000 on this date. 2. (a) During Year 1, Swifty reported $50,000 of net income. (b) During Year 1, Swifty paid $28,000 of dividends. 3. (a) During Year 2, Swifty reported $25,000 of net income. (b) During Year 2, Swifty paid $18,000 of dividends. 4. (a) During Year 3, Swifty reported a net loss of $8,000. (b) During Year 3, Swifty paid $3,500 of dividends. 5. Indicate the Year 3 ending balance in the Investment account, and cumulative totals for Years 1, 2, and 3 for dividend revenue and investment revenue.
Mozart Co. owns 35% of Melody Inc. Melody pays $50,000 in cash dividends to its shareholders for the period. Mozart's entry to record the Melody dividend includes a? O Debit to Cash for $50,000 O Credit to Cash for $17,500 Credit to Investment Revenue for $50,000 O Credit to Equity Method Investments for $17,500
4.The amount of the investor's initial investment in Aspect Co's shares is $40,000. The investor has a 30% ownership interest to which the investor applies equity method. The table summarises the associate's profit (loss) for each year. At what amount will investor report its investment in Aspect Co in its consolidated statements of financial position at the end of each financial year? At the Profit (loss) of the The investment in the associate in the consolidated statement of financial position end of associate $'000 $'000 50 2 (180) 100
Garrison holds a controlling interest in Robertson’s outstanding stock. For the current year, the following information has been gathered about these two companies: Garrison RobertsonSeparate $300,000 $200,000operating income (includes $50,000 intra-entity gross profit in ending inventory)Dividends paid ...32,000 50,000Tax rate . . . . . . . . . 40% 40% Garrison uses the initial value method to account for the investment in Robertson. Garrison’s separate operating income figure does not include dividend income for the current year.a. Assume that Garrison owns 80 percent of Robertson’s voting stock. On a consolidated tax return, what amount of income tax is paid?b. Assume that Garrison owns 80 percent of Robertson’s voting stock. On separate tax returns, what total amount of income tax is paid?c. Assume that Garrison owns 70 percent of Robertson’s voting stock. What total amount of income…
Use the info below to answer the following questions: On January 2, 2021, Pirate, Inc. purchased a 30% interest in Tee Corp. for $3, 000, 000 cash. During 2021, Tee's net income was S3, 500, 000 and it paid dividends of S1, 000, 000. Pirate's 2021 income from Tee was: Pirate's Equity Investment balance in Tee at December 31, 2021 will be:
Light Inc. had the following activities during the current year: • Acquired 4,000 shares of Dark Inc. for P5.200,000. • Sold an investment in Lonely Inc. for P7.000,000 when the carrying value was P6.600,000. • Acquired a P10,000,000, 4-year certificate of deposit from a bank. During the year, interest of 175.,000 was paid to Light Inc. • Collected dividends of P240.000 on share dividends. How much should be reported as cash inflows from operating activities?
Big owns 70% of Little and uses the equity method to account for its investment in Little. In 2020, Big reports Dividends of $800,000. Little reports Dividends of $300,000. For what amount is worksheet entry "D" (Dr. Investment. Cr. Dividends Paid) prepared for ? $90,000 $210,000 $240,000 $300,000
Bean Corporation purchased 35% of the outstanding shares of common stock of Williams Corporation as a long-term investment. Subsequently, Williams Corporation reported net income. What journal entry would Bean Corporation use to record its share of the earnings of Williams Corporation? debit Cash: credit Dividend Revenue debit Investment in Williams Corporation Stock: credit Cash debit Cash: credit Investment in Williams Corporation debit Investment in Williams Corporation; credit Income of Williams Corporation
Wendy Day Kite Company owns 40% of the outstanding stock of Strong String Company. During the current year, Strong String reported net income of $20 million. What effect does Strong String's reported net income have on Wendy Day's financial statements? Explain the reasoning for this effect.