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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>

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antiseptic1488 [7]

Based on accounting principles, the correct amount for total lease expense in 2019 is<u> $17,000.</u>

<h3>Why is this the correct amount?</h3>

Accounting principles state that lease payments must be recorded as an equal amount over the years of the lease.

The total lease payment is:

= 20,000 + 18,000 + 16,000 + 14,000

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2 years ago
Consider a small landscaping company run by Mr. Viemeister. He is considering increasing his firm’s capacity. If he adds one mor
joja [24]

Answer:

A.$12,000

B.$8000

C.MRPL/PL = 3

MRPK/PK =2

D) Since each of the above calculated ratios are more than one, therefore adding additional worker or tractor will increase the total revenue for each of the dollar spent.

Explanation:

(a) The Marginal Revenue Product of Labor (MRPL) can said to be the additional revenue generated when an additional worker is employed.

$66,000 - $54,000 = $12,000

Thus, MRPL is 12,000

b) Marginal revenue product of capital is

( 62000 - 54000)= $8000

c) MRPL/PL = 12000/ 4000= 3

MRPK/PK = 8000/4000=2

Therefore Since these two ratios are not equal it means the firm is not using the least cost combination of inputs.

d) Since each of the above calculated ratios are more than one, therefore adding additional worker or tractor will increase the total revenue for each of the dollar spent.

5 0
3 years ago
The Allowance for Doubtful Accounts T-account will have the ______ on the credit side. Multiple choice question. sales discounts
docker41 [41]

The Allowance for Doubtful Accounts T-account will have the  <u>estimated bad debts from the adjusting entry</u> sales discounts .

Doubtful account

An allowance for doubtful accounts is considered a “contra asset,” because it reduces the amount of an asset, in this case the accounts receivable. The allowance, sometimes called a bad debt reserve, represents management's estimate of the amount of accounts receivable that will not be paid by customers.

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8 0
2 years ago
Briefly describe the differences among international bond, bank and equity markets. Would you support an MNC that favors financi
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Answer:

Answer to this question is explained below in detail.

Explanation:

This question is not complete. This has two parts a) and b). Part a) is complete and b) is incomplete. I have written down the complete question and will try to answer completely.

a) Briefly describe the differences among international bond, bank and equity markets.

b) Would you support an MNC that favors financing through bonds issues or would you rather support one that favors financing through stock issues?

Solution:

a) We are asked to differentiate between international bond, bank and equity markets.

All three terms are related to raising funds, lending or borrowing to raise the capital for some government or for any company.

Let's start with International Bonds first.

International Bonds : In this globalized world, a company can raise its capital through getting debt in the form of international bonds from international institutions over the assets value of the company. For example: XYZ company has a asset value of 10 million dollars, so it can get international bonds accordingly.  

International Equity markets: Again due to interlinked world, companies and institutions all over the world can invest their funds in any company around the globe. And through equity markets companies can sell their shares to raise its capital depending upon the asset value of the company.

International Banks: International banks are international institutions which raise capital in particular country and have branches all over the world. It can lend funds to companies on particular interest rates. Furthermore, all those bonds are generated in these banks as well.

b) Supporting an MNC that favors financing through bonds issues or through equity markets or stock issues will depend on the debt/equity ratio of the company. If it is low, company should go for debt or bond issues. If it is high then it should opt for stock issues.

6 0
3 years ago
Sheridan Company had the following assets on January 1, 2022. Item Cost Purchase Date Useful Life (in years) Salvage Value Machi
Vlad [161]

Answer:

Jan 1

Dr Accumulated depreciation equipment 64,000

Cr Equipment 64,000

June 30

Dr Depreciation expenses 3,000

Cr Accumulated depreciation equipment 3,000

June 30

Dr Cash 11,300

Dr Accumulated depreciation equipment

37,300

Cr Gain on disposal 25,600

Cr Equipment 23,000

Dec 31

Dr Depreciation expenses 3,300

Cr Accumulated depreciation truck 3,300

Dec 31

Dr Loss on disposal of truck 9,600

Dr Accumulated depreciation 19,800

Cr Equipment 23,400

Explanation:

Sheridan Company Journal entries

Jan 1

Dr Accumulated depreciation equipment 64,000

Cr Equipment 64,000

June 30

Dr Depreciation expenses 3,000

Cr Accumulated depreciation equipment 3,000

June 30

Dr Cash 11,300

Dr Accumulated depreciation equipment

($23,000+$3,000+$11,300) 37,300

Cr Gain on disposal 25,600

Cr Equipment 23,000

Dec 31

Dr Depreciation expenses 3,300

($29,400-$3,000)/8

Cr Accumulated depreciation truck 3,300

Dec 31

Dr Loss on disposal of truck 9,600

($29,400- $19,800)

Dr Accumulated depreciation 19,800

($3,300×6)

Cr Equipment 23,400

8 0
3 years ago
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