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alexgriva [62]
3 years ago
12

Turner Company owns 10% of the outstanding stock of ICA Company. During the current year, ICA paid a $5 million cash dividend on

its common shares. What effect did this dividend have on Turner’s 2016 financial statements? Explain the reasoning for this effect.
Business
1 answer:
lozanna [386]3 years ago
6 0

Answer:

Turnover Company

The net income of Turnover will increase by $500,000.

Explanation:

a) Data and Calculations:

Turner Company's shareholding in ICA = 10%

ICA pays dividend totalling $5 million

Turner's share of dividend = $500,000 ($5 million * 10%)

b) This is not based on equity accounting.  Instead, the investment will be reported at fair value.  Equity accounting method will be applied in recording Turner's investments in ICA Company, if the ownership interest is valued at 20–50% of the stock.

c) The $500,000 dividends received from ICA Company will be reported in the Income Statement of Turner Company as other income, unless Turner ordinarily buys and sells stocks.  The 10% shareholding does not amount to significant control or influence for the accounts of Turner and ICA to be consolidated.

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3 years ago
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Explanation:

Special identification allocation method: Under this method, the allocation is done on the basis of days, weeks, etc to know how much inventory is left on the particular date.

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4 0
3 years ago
Monica received an inheritance of $70,000. She invested part at 11% and deposited the remainder in tax-free bonds at 10%. Her to
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Answer:

The correct answer is $50,000.

Explanation:

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So , we can calculate the invested at 11% by using following formula:

Let the amount invested at 11% = X

So,

= 11% × X + (70,000 - X) × 10% = $7,500

= 0.11 × X + (70,000 - X) × 0.1 = $7,500

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