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torisob [31]
3 years ago
7

Dodge, Incorporated acquires 15% of Gates Corporation on January 1, 2011, for $105,000 when the book value of Gates was $600,000

. During 2011 Gates reported net income of $150,000 and paid dividends of $50,000. On January 1, 2012, Dodge purchased an additional 25% of Gates for $200,000. Any excess cost over book value is attributable to goodwill with an indefinite life. The fair-value method was used during 2011 but Dodge has deemed it necessary to change to the equity method after the second purchase. During 2012 Gates reported net income of $200,000 and reported dividends of $75,000. The income reported by Dodge for 2012 with regard to the Gates investment is a. $80,000. b. $30,000. c. $50,000. d. $15,000. e. $75,000.
Business
1 answer:
IceJOKER [234]3 years ago
5 0

Answer:

a. $80,000

Explanation:

In this question we are only concerned about the net income reported by Dodge on its income statement.

First we need to calculate ownership % in 2012 = 15% + 25% = 40%

Net income of 2012 (Gates) = $ 200000

hence Dodge will report net income of 40% of 200000 = $80000

Hence the correct answer is A

Note: Dividends will not affect the investors net income but it would reduce the investment value of Gate reported by Dodge (as it is seen as a return on investment)

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What is enhanced by skillful organization of the information presented in a report? Transfer and affectation Readability and eff
Alborosie

Answer:

(a) Reliability and effectiveness

(b) Proposal, plan, and schedule

Explanation:

  • Highly organization including its knowledge provided in a study increases reliability and efficacy. However, throughout this case, the remaining survivors aren't relevant.
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7 0
3 years ago
Calculate the required rate of return for Avy Inc., assuming that the company has a beta of 1.10, while investors expect treasur
drek231 [11]

Answer:

8.5%

Explanation:

Avy incorporation has a beta of 1.10

The risk free rate is 3.0%

The market risk premium is 5.0%

Therefore, the required rate of return can be calculated as follows

Required rate of return= Risk-free rate+beta(market Risk premium)

= 3.0% + 1.10(5.0%)

= 3.0%+5.5

= 8.5%

Hence the required rate of return is 8.5%

3 0
3 years ago
On September 1, Year 1, the Central Illinois University ticket office sold $1,800,000 worth of season basketball tickets. Ten ho
Alexxandr [17]

Answer:

The adjusted balance in Deferred Revenue at the end of year 1 is $1,080,000.

Explanation:

Deferred revenue is also known as unearned revenue which means that income is received but not earned. In accrual basis accounting, we record revenues only after we deliver the goods or perform the services.

In this case, the $1,800,000 is received for 10 home games which means that per game we received 1,800,000/10 = 180,000.

Since only 4 games were played during the year, the revenue earned at the end of year 1 is: 180,000*4= 720,000

The remaining 6 games will be played in year 2 but we have already received the payment of games, so it will be considered as a Deferred Revenue. The amount of Deferred Revenue at the end of year 1 is:

⇒ 180,000*6 = 1,080,000

4 0
4 years ago
Health insurance Plan A requires the insured to pay $1000 or 50% of total cost, whichever is lower. Plan B requires the insured
kirill [66]

Answer:

C. $3,800

Explanation:

The computation of the cost level for both insurance policy is shown below:

We choose $1,000 or 50% which ever is lower

We take the help of the given options

a. For the first option

The 50% is 300 which is less than the 1,000 now we take 80% of ($600 - $300) that comes $240

b. For the second option

The 50% is 500 which is less than 500 now we take 80% of ($1,000 - $300) that comes $560

c. For the third optiion

The 50% of $3,800 i.e $1,900 and $1,000 whichever is less i.e ($3,800 - $1,000) = $2,800 so it is $1,000 now we take the 80% of ($3,800 - $300) i.e $2,800

Thus the amount comes same

Thus this is the right option

5 0
3 years ago
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