Submitted by: Submitted by carlosSancc
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Words: 1031
Pages: 5
Category: Business and Industry
Date Submitted: 10/09/2014 10:31 AM
1. D. A deduction from the investment account.
2. B. The investor owns 30% of the investee but another owner holds the remaining70%.
3. C. A retrospective adjustment is made to restate all prior years presented using the equity method.
4. B. Changes in the fair value of the investor’s ownership shares of the investee.
5. D. The investment retains a zero balance until subsequent investee profits eliminate all unrecognized losses.
6. A. $1,724,000
Acquisition price $1,600,000
Equity in Investee income ($560,000 × 40%) 224,000
Dividends (50,000 shares × $2.00) (100,000)
Investment in Harrison Corporation as of December 31 $1,724,000
7. A. $728,000
Acquisition price $700,000
Income accruals: 2014—$170,000 × 20% 34,000
2015—$210,000 × 20% 42,000
Amortization (Excess cost over book value): 2014 (10,000)
Amortization: 2015 (10,000)
Dividends: 2014—$70,000 × 20% (14,000)
2015—$70,000 × 20% (14,000)
Investment in Martes as of December 31, 2015 $728,000
Acquisition price of Martes $700,000
Acquired net assets (book value) ($3,000,000 × 20%) (600,000)
Excess cost over book value to patent $100,000
Annual amortization (10 year remaining life) $10,000
8. B. $507,600
Purchase price of Johnson stock $500,000
Book value of Johnson Net Assets ($900,000 × 40%) (360,000)
Cost in excess of book value $140,000
Remaining Annual
Payment identified with undervalued assets life amortization
Building ($140,000 × 40%) 56,000 7 yrs. $8,000
Trademark ($210,000 × 40%) 84,000 10 yrs. 8,400
Total $ -0- $16,400
Investment purchase price $500,000...