1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
olganol [36]
3 years ago
11

Rogers, Inc., acquires 15% of Procter Corporation on January 1, 2020, for $70,000. During 2020, Procter reported net income of $

180,000 and paid total dividends of $40,000. At the year end of 2020, the market value of this 15% investment indicates the value of $68,000. On January 1, 2021, Rogers purchased an additional 30% of Procter for $310,000. During 2021, Procter reported net income of $300,000 and paid dividends of $40,000.a. Prepare the January 1, 2021 entry to adjust the Equity Investment account for the additional acquisition on that date; what is the investment balance?
b. Compute the balance in the Equity Investment account at December 31, 2021
Business
1 answer:
ioda3 years ago
7 0

Answer:

a) <u>Investment Value as at December 31, 2020 / Jan 1, 2021        $64,000</u>

<u>b) Value of Equity Investment Dec 31, 2021                                 $491, 000</u>

Explanation:

First Part is to calculate the January 1, 2021 entry to adjust the Equity account based on additional acquisition on that date

It should be noted that the investment balance as at 31st December 2020, will also be the value of the investment balance for the start of the next year January 1st 2021.

Therefore,

Step 1: Calculate the Investment Balance as at 31st Dec, 2020

Acquisition Cost of 15% Investment (Procter Corporation Jan 1)   $70,000

Subtract: The dividend received 31st Dec, 2020 ($40,000 x .15)    <u>($6,000)</u>

<u>Investment Value as at December 31, 2020                                     $64,000</u>

Step 2: Calculate the Investment Gain (Equity Investment)

The formula= Market value of Equity (year end) - Carrying Value (calculated in step 1)

= $68,000 - $64,000

= $4,000

Step 3: The journal entry to adjust the equity investment account

Date                   Particulars                               Debit                       Credit

Dec, 31, 2020     Equity Investment                 $4,000

                                Gain Unrealized on Equity Investment            $4,000

being the journal record adjusting equity investment at the time of new acquisition

Part B: Balance of the Equity Investment Account Dec 31, 2021

The value of the Investment as at 31, Dec, 2020              $64,000

Add: The additional investment in Procter (Jan 1, 2021)   $310,000

Add: Net Income Share for Rogers (45% x $300,000)      $135,000

(45% because the initial 15% and the 30% additional)

Subtract: Dividend received (45% x $40,000)                   <u>  ($18,000)</u>

<u>Value of Equity Investment Dec 31, 2021                           $491, 000</u>

You might be interested in
Kegler Bowling installs automatic scorekeeping equipment with an invoice cost of $190,000. The electrical work required for the
Ulleksa [173]

Answer:

The cost recorded for the equipment=$229,550

Explanation:

The total recorded cost of the automatic equipment has to include the purchase cost and other additional associated costs that come with the equipment. This can be expressed as;

T=P+A

where;

T=total cost

P=purchase cost/invoice cost

A=additional costs(electrical work cost+delivery cost+sales tax+repair cost)

In our case;

T=unknown

P=$190,000

A=(20,000+4,000+13,700+1,850)=$39,550

replacing;

T=190,000+39,550=229,550

The total cost=$229,550

The cost recorded for the equipment=$229,550

7 0
3 years ago
Ken Young and Kim Sherwood organized Reader Direct as a corporation; each contributed $55,000 cash to start the business and rec
Talja [164]

Answer:

The ending retained earning would be $2,400

Explanation:

For computing the ending retained earnings balance, we have to use the formula which is shown below:

Even in the question, the formula is given so we use it

Ending retained earnings = Beginning retained earnings + net income - dividend

Ending retained earnings = 0 + $6,000 - $3,600

In the question, the beginning retained earnings balance is not given so we assume zero balance

So, the ending retained earnings would be $2,400

7 0
3 years ago
In year 1000 a man named acholos nemroc celebrated him birthday, turning 100 years old, how old was he in -100?
Over [174]

Answer:

Okay

Explanation:

The answer is jjgxhkdyyffhohohugugojjhyfyffygihhhyghv28283939

3 0
2 years ago
You want to start your own consulting business and believe it could produce cash flows of $5,600, $48,200, and $125,000 at the e
Inessa05 [86]

Answer:

This business idea worth $430,127 today

Explanation:

Today value of the future cash flows can be calculated by discounting the cash flows on the given discount rate. It is called the present value and sum of present value of all cash flows is called Net present value.

We use following format to calculate NPV for the given business idea

Years                                     1                  2                  3

Cash Flows                      $5,600       $48,200      $125,000

Sale Proceeds                                                         $450,000

Net Cash Flows               $5,600       $48,200      $575,000

Discount Factor    14%    0.8772        0.7695        0.6750

Present values                 $4,912.32   $37,089.9    $388,125

Net present value of business idea = $4,912.32 + $37,089.9 + $388,125

NPV = 430,127.22

3 0
2 years ago
Green Corporation has current earnings and profits of $100,000 and negative accumulated earnings and profits of ($200,000). A $5
Sphinxa [80]

Answer:

False

Explanation:

Green's distribution of $50,000 in to its sole shareholder at the end of the year should be treated as a dividend because Green's total earnings and profits for the year were $100,000.

A distribution from a corporation to a shareholder  can only be treated as a dividend when the corporation made a profit during the current year, or has positive accumulated earnings and profits.

5 0
3 years ago
Other questions:
  • "when economists say that money promotes ________, they mean that money encourages specialization and the division of labor."
    7·1 answer
  • The united states has a regressive tax system. <br> a. True <br> b. False
    15·2 answers
  • A monopolist introduces a technological innovation that lowers the marginal cost and average cost of production. The price of th
    14·1 answer
  • The Macro Islands can produce either 250 bamboo towels or 500 botanical soaps using all its resources. The Micro Islands can pro
    6·1 answer
  • Department S had no work in process at the beginning of the period. It added 13,600 units of direct materials during the period
    11·1 answer
  • Andrew opened a fast-food restaurant on the corner of First and Main Streets in a small town. He named the restaurant The Hambur
    7·1 answer
  • Darius Rucker is leaving Theta Tech after several years. During his time at Theta he accumulated a deferred payroll benefit. He
    10·1 answer
  • https://dojopdf.s3-external-1.amazonaws.com/648188929767d193da308cab1b01c024/pdf_api/2019_parent_invitation-5fd2577f548e493f3e59
    12·1 answer
  • What are the 4 important dimension of wellness explain each dimension?
    12·1 answer
  • A ___ is used in scotch production to account for the heads for the purpose of calculating duty.
    7·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!