Advanced Accounting
14th Edition
ISBN: 9781260247824
Author: Joe Ben Hoyle, Thomas F. Schaefer, Timothy S. Doupnik
Publisher: RENT MCG
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Chapter 1, Problem 7P
To determine
Introduction: The equity method of accounting is a method where the investment is recognized at cost initially and thereafter accounted for based on the change in the investor’s share in investee net assets. The share in the investee’s profit or loss is included in the investor's profit or loss.
The equity method balance of D’s investment in M Inc. on December 31, 2021.
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In January 2020, Domingo, Inc., acquired 20 percent of the outstanding common stock of Martes, Inc., for $930,000. This investment gave Domingo the ability to exercise significant influence over Martes, whose balance sheet on that date showed total assets of $4,626,000 with liabilities of $926,000. Any excess of cost over book value of the investment was attributed to a patent having a remaining useful life of 10 years.
In 2020, Martes reported net income of $195,000. In 2021, Martes reported net income of $236,250. Dividends of $81,000 were declared in each of these two years. What is the equity method balance of Domingo’s Investment in Martes, Inc., at December 31, 2021?
In January 2020, Domingo, Inc., acquired 20 percent of the outstanding common stock of Martes, Inc., for $856,000. This investment gave Domingo the ability to exercise significant influence over Martes, whose balance sheet on that date showed total assets of $4,634,000 with liabilities of $974,000. Any excess of cost over book value of the investment was attributed to a patent having a remaining useful life of 10 years.
In 2020, Martes reported net income of $259,000. In 2021, Martes reported net income of $302,250. Dividends of $73,000 were declared in each of these two years. What is the equity method balance of Domingo’s Investment in Martes, Inc., at December 31, 2021?
Multiple Choice
$914,250.
$1,001,850.
$1,014,250.
$939,050.
In January 2020, Marcus, Inc., acquired 20 percent of the outstanding common stock of Lily, Inc., for $769,000. This investment gave Marcus the ability
to exercise significant influence over Lily, whose balance sheet on that date showed total assets of $4,199,000 with liabilities of $909,000. Any excess of
cost over book value of the investment was attributed to a patent having a remaining useful life of 10 years.
In 2020, Lily reported net income of $222,000. In 2021, Lily reported net income of $268,250. Dividends of $79,000 were declared in each of these two
years. What is the equity method balance of Marcus's Investment in Lily, Inc., at December 31, 2021?
Multiple Choice
$919,150.
$813,250.
$835,450.
$908,050.
Chapter 1 Solutions
Advanced Accounting
Ch. 1 - What advantages does a company achieve when it...Ch. 1 - A company acquires a rather large investment in...Ch. 1 - What accounting treatments are appropriate for...Ch. 1 - Prob. 4QCh. 1 - Why does the equity method record dividends from...Ch. 1 - Prob. 6QCh. 1 - Smith. Inc., has maintained an ownership interest...Ch. 1 - Prob. 8QCh. 1 - Because of the acquisition of additional investee...Ch. 1 - Prob. 10Q
Ch. 1 - Prob. 11QCh. 1 - Prob. 12QCh. 1 - In a stock acquisition accounted for by the equity...Ch. 1 - Prob. 14QCh. 1 - What is the difference between downstream and...Ch. 1 - Prob. 16QCh. 1 - Prob. 17QCh. 1 - What is the fair-value option for reporting equity...Ch. 1 - When an investor uses the equity method to account...Ch. 1 - Prob. 2PCh. 1 - Prob. 3PCh. 1 - Under fair-value accounting for an equity...Ch. 1 - When an equity method investment account is...Ch. 1 - Prob. 6PCh. 1 - Prob. 7PCh. 1 - Prob. 8PCh. 1 - Evan Company reports net income of $140,000 each...Ch. 1 - Prob. 10PCh. 1 - Prob. 11PCh. 1 - Prob. 12PCh. 1 - Prob. 13PCh. 1 - Prob. 14PCh. 1 - Prob. 15PCh. 1 - Prob. 16PCh. 1 - Prob. 17PCh. 1 - Prob. 18PCh. 1 - Prob. 19PCh. 1 - Prob. 20PCh. 1 - Prob. 21PCh. 1 - Prob. 23PCh. 1 - Matthew, Inc., owns 30 percent of the outstanding...Ch. 1 - Prob. 26PCh. 1 - Prob. 28PCh. 1 - Prob. 29PCh. 1 - Prob. 30PCh. 1 - Prob. 31P
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