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shepuryov [24]
3 years ago
13

On January 1, 2016, American Corporation purchased 25% of the outstanding voting shares of Short Supplies common stock for $232,

500 cash. On that date, Short's book value and fair value were both $930,000. The equity method is deemed appropriate for this investment. Short's net income reported on December 31, 2016, was $89,000. During 2016, Short also paid cash dividends in the amount of $28,500. Required: Compute the amount that would be reported for the investment on American Corporation's financial statements at December 31, 2016.
Business
1 answer:
gregori [183]3 years ago
8 0

Answer:

$247,625

Explanation:

Expectation: To compute the amount to be reported in the investment on American Corporation's Financial Statements - December 31st, 2016

Step 1: American Corporation purchases of Short Supplies = $232,500

This represents 25% of the outstanding voting shares of Short Supplies.

Short Supplies net income was $89,000

Therefore, American Corporation's share of net income = 25% x $89,000

= $22,250. This is the reported income as a result of the voting shares bought.

Secondly, since cash dividend was paid (paid before the declaration of the net income), then American Corporation as an investor is also entitled to the 25% of the dividend

Therefore,

The final amount of total investment of American Corporation to be reported in the financial statement is

The value of the initial stock purchased + Share of net Income - Cash dividend due.

= $ 232,500 (original investment) + $22,250 (share of net income) - ($7,125) Cash dividend

= $247,625

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Liberal humanism is a philosophical stance that highlights the agency and value of human beings, both individually and collectively.
3 0
2 years ago
A company purchased inventory for $ 2 comma 000 from a vendor on​ account, FOB shipping​ point, with terms of 2​/10, ​n/30. The
Flauer [41]

Answer:

Inventory would be 1, 768

Explanation:

2,000  goods

 +200  freight-in (A)

  -400  returned goods

 <u>   -32 </u> discount (B)

1, 768 net amount for inventory

<u>Notes:</u>

(A) The freight-in will be included in the inventory, as is a cost needed to have the inventory in the company's possession and be ready to use or sell.

(B) goods x discount rate

net goods 2,000 - 4,00 return = 1,600

discount for payment within 10 days 2%

Discount on purchase: 1,600 x 2% = 32

8 0
3 years ago
Using the following information, prepare a vertical analysis of two years' income statements. Fees Earned is $153,500 for Year 2
ValentinkaMS [17]

Answer:

(B) Operating income has increased as a percentage of revenue

Explanation:

Conducting a vertical analysis,

Operating income (year 1) = Fees earned, less operating expenses

= 149,700 - 127,245 = $22,455

Therefore operating income as a percentage of revenue = 22,455/149,700 = 15%.

Operating income (year 2) = 153,500 - 122,800 = $30,700

Therefore operating income as a percentage of revenue = 30,700/153,500 = 20%.

Therefore, operating income as a percentage of revenue increased from year 1 to year 2.

7 0
3 years ago
Peggy offers to sell Shelby a purebred Scottish terrier puppy for $800. Shelby and Peggy do not discuss the dog's ancestry, but
ladessa [460]

Answer:

a. No, because Shelby made a mistake about the dog's value, not a mistake about a material fact.

Explanation:

Peggy made an offer to sell the dog for $800, they didn't discuss the dog's ancestry and Shelby wrongly assumed the dog was from champion lines and agreed to buy the dog for $800.

Based on further investigations, she discovered the dog was worth just $200.

She cannot rescind the contract because she wrongly assumed the dog's value not an error about à material fact. Peggy sold the dog at her own rates and Shelby bought the dog while wrongly assuming the value, so she cannot cancel the contract based on that.

6 0
3 years ago
Low unemployment rates are often: A. an indicator that finding a job is extremely difficult. B. associated with an ability to fi
lakkis [162]

Answer:

The correct answer is letter "B": associated with an ability to find a job with relative ease.

Explanation:

Unemployment is the state in which an individual who is able and willing to join the workforce cannot find a job even if that individual is constantly looking for opportunities.  

<em>High unemployment rates are typically seen during recessions while the unemployment of a country tends to be low during economic growth. In the last scenario, mainly private investment helps to find a job to be relatively easy.</em>

7 0
2 years ago
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