Exam 1: A: the Equity Method of Accounting for Investments

Tinker Co.owns 25% of the common stock of Harbor Co.and uses the equity method to account for the investment.During 2018, Harbor reported income of $120,000 and paid dividends of $40,000.Harbor owns a building with a useful life of twenty years, which was undervalued by $80,000 at the time that Tinker bought its shares of Harbor's common stock. Required: Prepare a schedule to show the equity income Tinker should recognize for 2018 related to this investment.

On January 1, 2018, Jolley Corp.paid $250,000 for 25% of the voting common stock of Tige Co.On that date, the book value of Tige was $850,000.A building with a carrying value of $160,000 was actually worth $220,000.The building had a remaining life of twenty years.Tige owned a trademark valued at $90,000 over cost that was to be amortized over 20 years. During 2018, Tige sold to Jolley inventory costing $60,000, at a markup of 50% on cost.At the end of the year, Jolley still owned some of these goods with an intra-entity selling price of $33,000.Jolly uses a perpetual inventory system. Tige reported net income of $200,000 during 2018.This amount included a gain of $35,000.Tige paid dividends totaling $40,000. Required: Prepare all of Jolley's journal entries for 2018 in relation to Tige Co.Assume the equity method is appropriate for use.

What is the Equity in Maya Income that should be reported by Cayman in 2018?

On January 4, 2018, Watts Co.purchased 40,000 shares (40%) of the common stock of Adams Corp., paying $800,000.There was no goodwill or other cost allocation associated with the investment.Watts has significant influence over Adams.During 2018, Adams reported income of $200,000 and paid dividends of $80,000.On January 2, 2019, Watts sold 5,000 shares for $125,000.What was the balance in the investment account after the shares had been sold?

What is the balance in Acker's Investment in Howell account at December 31, 2018?

What is the appropriate journal entry to record the sale of the 15,000 shares?

How are dividends received from Inkblot reflected in Trycker's accounting records for 2017?

What is the Equity in Maya Income that should be reported by Cayman in 2019?

What is the amount of the excess of purchase price over book value?

What is the balance in the investment account for the 15% ownership interest, at January 1, 2018?

What is the investor's share of gross profit on intra-entity inventory sales that should be deferred on December 31, 2018?

What is the balance in Jackie Corp's Investment in Rob Co.account at December 31, 2018?

At what amount will Inkblot be reflected in Trycker's December 31, 2017 balance sheet?

On January 1, 2016, Dermot Company purchased 15% of the voting common stock of Horne Corp.On January 1, 2018, Dermot purchased 28% of Horne's voting common stock.If Dermot achieves significant influence with this new investment, how must Dermot account for the change to the equity method?

After allocating cost in excess of book value, which asset or liability would not be amortized over a useful life?

The balance in the Investment in Sacco account at December 31, 2017, is

For 2018, what is the total amount of excess amortization for Austin's 25% investment in Gainsville?

When applying the equity method, how is the excess of cost over book value calculated and accounted for?

What was the balance in the Investment in Ticker Co.account at the end of 2018?

What is the primary objective of the fair value method of accounting for an investment?