Pender Corp. paid $330,000 for a 30% interest in Saltspring Limited on January 1, Year 6. During Year 6, Saltspring paid dividends of $118,000 and reported profit as follows: Profit before discontinued operations Discontinued operations loss (net of tax) Profit $379,000 Required: (35,400) $343,600 Pender's profit for Year 6 is calculated on $1,062,000 in sales, expenses of $118,000, income tax expense of $377,600, and its investment income from Saltspring. Both companies have an income tax rate of 40%. (a) Assume that Pender reports its investment using the equity method. (i) Prepare all journal entries necessary to account for Pender's investment for Year 6. (ii) Determine the correct balance in Pender's investment account at December 31, Year 6.
Pender Corp. paid $330,000 for a 30% interest in Saltspring Limited on January 1, Year 6. During Year 6, Saltspring paid dividends of $118,000 and reported profit as follows: Profit before discontinued operations Discontinued operations loss (net of tax) Profit $379,000 Required: (35,400) $343,600 Pender's profit for Year 6 is calculated on $1,062,000 in sales, expenses of $118,000, income tax expense of $377,600, and its investment income from Saltspring. Both companies have an income tax rate of 40%. (a) Assume that Pender reports its investment using the equity method. (i) Prepare all journal entries necessary to account for Pender's investment for Year 6. (ii) Determine the correct balance in Pender's investment account at December 31, Year 6.
Chapter20: Corporations And Parterships
Section: Chapter Questions
Problem 51P
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Transcribed Image Text:Pender Corp. paid $330,000 for a 30% interest in Saltspring Limited on January 1, Year 6. During Year
6, Saltspring paid dividends of $118,000 and reported profit as follows:
Profit before discontinued operations
Discontinued operations loss (net of tax)
Profit
$379,000
(35,400)
$343,600
Pender's profit for Year 6 is calculated on $1,062,000 in sales, expenses of $118,000, income tax
expense of $377,600, and its investment income from Saltspring. Both companies have an income tax
rate of 40%.
Required:
(a) Assume that Pender reports its investment using the equity method.
(i) Prepare all journal entries necessary to account for Pender's investment for Year 6.
(ii) Determine the correct balance in Pender's investment account at December 31, Year 6.
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