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
Is it legal or ethical for an insurance agent to suggest a variable life insurance policy to an 80-year-old man? explain your an
Citrus2011 [14]
No, it is no ethical 

3 0
3 years ago
Why do you think it will be important to stay flexible if your goals change as you get<br> older?
Svetradugi [14.3K]

Answer:

You will feel stronger once you gain a bit of flexibility, simply because that flexibility gives you the range of motion to let your muscles work more efficiently. Maintaining flexibility will aid in muscle and joints health, which can keep older adults doing their favorite daily activities and remain independent.

6 0
3 years ago
Juanita, the stadium manager, spends $10,000 on a broadcast TV ad, $15,000 on a cable TV ad, and $4,000 on a radio ad. What perc
tatuchka [14]

Answer:

13.7931

Explanation:

6 0
2 years ago
When Crossett Corporation was organized in January Year 1, it immediately issued 4,000 shares of $50 par, 6 percent, cumulative
hichkok12 [17]

Answer:

The correct answer is $12,000.

Explanation:

According to the scenario, the given data are as follows:

Shares issues On Jan.1 Year 1 = 4,000 shares

Par value of shares = $50 par

Cumulative preferred stock = 6%

So, we can calculate the dividend arrearage as of January 1, Year 2 by using following formula:

Dividend as of Jan.1, year 2 = Shares issues On Jan.1 Year 1 × Par value of shares × Cumulative preferred stock

= 4,000 × $50 × 6%

= $12,000

3 0
3 years ago
On September 1, 2021, Hiker Shoes issued a $108,000, 8-month, noninterest-bearing note. The loan was made by Second Commercial B
bearhunter [10]

Answer:

effective interest rate = 4.75 %

Explanation:

given data

principal = $108,000

time = 8 months = \frac{8}{12} year

rate = 10%

solution

we get here first interest that is

interest = principal × rate × time .................1

put here value

interest = $108,000  × 10% × \frac{8}{12}

interest = $7200

so here effective interest rate will be here as

effective interest rate = \frac{interest}{principal- interest} × time  ...........2

put here value

effective interest rate = \frac{7200}{108000-7200}  ×  \frac{8}{12}

effective interest rate = 0.04761

effective interest rate = 4.75 %

6 0
3 years ago
Other questions:
  • John's job provided the main income for his family. He died unexpectedly and had no life insurance. The probable financial conse
    9·1 answer
  • Suppose Turkey has exports of 2 billion Turkish​ Lira, while its imports are 2 billion Turkish Lira. Calculate​ Turkey's "Index
    9·1 answer
  • he following labor standards have been established for a particular product: Standard labor-hours per unit of output 9.0 hours S
    6·1 answer
  • Thalia is an employee of Universal Insurance Company. Universal’s employee manual states that workers will be dismissed only for
    7·1 answer
  • What are some reasons why the budget deficit and non budgeted spending have been adding more than $500 billion to the national d
    7·1 answer
  • All of the following are true about the Correspondence category of communications with the public EXCEPT?
    14·1 answer
  • An arrangement in which brokers pool their listings and all commissions are divided between the listing broker and the selling b
    11·1 answer
  • Identify the statement below that is incorrect. A) The normal balance of accounts receivable is a debit. B) The normal balance o
    10·2 answers
  • Which of the following employees is most at risk of repetitive strain injury?
    15·2 answers
  • Capital expenditure projects may be classified in all the following types EXCEPT ____. Group of answer choices
    6·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!