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kenny6666 [7]
2 years ago
10

ABC company uses the equity method to account for its 40% interestt in voting stock of XYZ company. ABC paid $5,000,000 for inve

stment at the beginning of the current year, and XYZ's total book value at the time was $6,000,000. The discrepancy between acquisition cost and share of book value acquired
Business
1 answer:
frutty [35]2 years ago
3 0

Answer:

the end of year book value would be $5,160,000.

Explanation:

given data

equity method to account = 40%

ABC paid investment = $5,000,000

total book value = $6,000,000

solution

when there are more than 20% stake in other company

than we apply equity method

so here we use  

Amount of investment                                                           = $5,000,000

Share in net incom  (600,000 x 40%)                                  = $240,000

Share in the dividend (200,000 x 40%)                               = -$80,000

Book value at the end of the year                                         = $5,160,000

So the end of year book value would be $5,160,000.

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Answer:

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A. currency swap.

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C. backwardation.

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Arbitrage is a common practice used to gain profits from inefficient markets. Since most financial markets are inefficient by nature, dealers and similar business entities that have an interest in this kind of business practice.

The profit in arbitrage is based on the <u>imbalance in the two prices</u> on each market respectively. The term is mainly used for financial markets and various financial instruments (securities, bonds, currencies).

In the example above, the dealer becomes an arbitrageur by making a profit from the difference in the yen/dollar exchange rate in two markets (NY and London.)

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