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ahrayia [7]
3 years ago
11

Plastic Company purchased 100 percent of Spoon Company's voting common stock for $666,000 on January 1, 20X4. At that date, Spoo

n reported assets of $697,000 and liabilities of $241,000. The book values and fair values of Spoon's assets were equal except for land, which had a fair value $116,000 more than book value, and equipment, which had a fair value $94,000 more than book value. The remaining economic life of all depreciable assets at January 1, 20X4, was ten years. Spoon reported net income of $78,000 and paid dividends of $53,000 in 20X4.
Required:
Compute the amount of investment income to be reported by Plastic using the equity method for 20X4.
Business
1 answer:
ziro4ka [17]3 years ago
6 0

Answer: $68,600

Explanation:

Investment Income using Equity method = Plastic company Share in income of Spoon company - Depreciation on Assets

Plastic Company share in Income of Spoon Company = 100% * 78,000 = $78,000

Land cannot be depreciated so only Equipment will be depreciated.

= 94,000/10 years

= $9,400

Investment Income using Equity method = 78,000 - 9,400 = $68,600

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3 years ago
8. Effective Yield. A US investor obtain British pounds when the pound is worth $1.50 and invest in a one year-money market secu
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