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marta [7]
3 years ago
6

Gaw Company owns 15% of the common stock of Trace Corporation and used the fair-value method to account for this investment. Tra

ce reported net income of $110,000 for 2018 and paid dividends of $60,000 on October 1, 2018. How much income should Gaw recognize on this investment in 2018?
a) $16,500.
b) $9,000.
c) $25,500.
d) $7,500.
e) $50,000.
Business
1 answer:
Marizza181 [45]3 years ago
3 0

Answer:

It is $9,000 (B)

Explanation:

Total paid dividends paid = $60,000

Return on Investment = $60,000 *15%

                                    =$9,000.

Gaw Company investment in Trace Corporation will be treated as Investment Assets. In its book ,it can only recognize its share of dividend paid as return on investment.

Gaw Company cannot recognize its share of entire net income of Trace because it doesn't have controlling interest (i.e subsidiary) in the company neither does it have significant influence (i.e associate).

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d

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Answer and Explanation:

a. The preparation of income statement is shown below:-

                               Income Statement

Service revenue                               $80,000

operating expenses  

Salary expenses           $28,000

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expense                        $3,273

Total operating expense                   $31,273

Net income                                         $48,727

Working Note :-

Days       Amount     Percentage     Allowance balance

Current   $16,800       0.01                  $168

0-30         $5,100        0.05                 $255

31-60       $4,000        0.10                  $400

61-90       $2,000        0.30                 $600

Over 90

days         $3,700       0.50                  $1,850

Total        $31,600                                $3,273

b. The computation of net realizable value of the accounts receivable is shown below:-

Net realizable value = Accounts receivable - Allowance for doubtful accounts

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4 0
3 years ago
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Answer:

Under allocation= 1,000 underallocated

Explanation:

Giving the following information:

Dukes Corporation used a predetermined overhead rate this year of $2 per direct labor-hour, based on an estimate of 20,000 direct labor-hours to be worked during the year. Actual costs and activity during the year were: Actual manufacturing overhead cost incurred $ 38,000 Actual direct labor-hours worked 18,500

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Over/under allocation= real MOH - allocated MOH

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A firm commitment arrangement with an investment banker occurs when the: issue is solidly accepted in the market as evidenced by
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Answer:

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