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sukhopar [10]
4 years ago
14

Lee, Inc. acquired 30% of Polk Corp.'s voting stock on January 1, 2016 for $100,000. During 2016, Polk earned $40,000 and paid d

ividends of $25,000. Lee's 30% interest in Polk gives Lee the ability to exercise significant influence over Polk's operating and financial policies. During 2017, Polk earned $50,000 and paid dividends of $15,000 on April 1 and $15,000 on October 1. On July 1, 2017, Lee sold half of its stock in Polk for $66,000 cash. What should the gain on sale of this investment in Lee's 2017 Income Statement be? a) $10,000 b) $16,000 c) $13,750 d) $12,250
Business
1 answer:
gavmur [86]4 years ago
8 0

Answer:

D) $12,250

Explanation:

Lee's gain = $66,000 - half the carrying value of Lee's investment

Lee must use the equity method because its 30% stake at Polk provided a significant influence over the investee corporation. The equity method requires that Lee recognize its share of undistributed earnings of Polk's income.

The carrying value must include the first dividend of 2017, the second dividend is not included since it occurred after the sales was made. The carrying value = initial purchase - stock ownership(2016 income - 2016 dividends + 50%(2017 income) - first dividends 2017) = $100,000 + 30%($40,000 - $25,000 + 50%($50,000) - $15,000) = $107,500

Lee's gain = $66,000 - $107,500/2 = $66,000 - $53,750 = $12,250

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3 years ago
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6 0
3 years ago
When corporate headquarters announced new service quality standards for pizza franchise owners, Roland knew he would have troubl
elena-s [515]

Answer:

E) they were not involved in setting the goals

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I personally like management by objectives (MBO) since it is a management model that encourages employee participation in the decision making processes and goal setting processes for an organization.

When the employees feel that they have a saying in the decision making processes or goal setting processes, they are really motivated to reach those goals and give their best to prove that they were right when they proposed something. The motivation is different.

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When a company borrows $150 million during the year and also repays $120 million of debt, the company can disclose the $30 milli
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B. False

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Cash inflows and outflows for borrowing and repayment of debt are reported separately at gross amounts in the financial activities section of the cash flow statement.

When a company borrows $150 million during the year and also repays $120 million of debt. In this scenario, both amount of transaction (borrowing and repayment) will be reported separately at gross amount in the financial activities section of the cash flow statement.

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4 years ago
The Cost of a Flower Business. Jen left a job paying ​$75,000 per year to start her own florist shop in a building she owns. The
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Answer:

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Economic Costs = $(105,000 + 18,000) = $123,000

5 0
4 years ago
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