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 31P
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. Fair value method initial investment is recorded at cost and then adjusted with fair value.
The
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On January 1, 2020, Fisher Corporation purchased 40 percent (90,000 shares) of the common stock of Bowden, Inc., for $980,000 in cash and began to use the equity method for the investment. The price paid represented a $48,000 payment in excess of the book value of Fisher's share of Bowden's underlying net assets. Fisher was willing to make this extra payment because of a recently developed patent held by Bowden with a 15-year remaining life. All other assets were considered appropriately valued on Bowden's books.
Bowden declares and pays a $90,000 cash dividend to its stockholders each year on September 15. Bowden reported net income of $400,000 in 2020 and $348,000 in 2021. Each income figure was earned evenly throughout its respective years.
On July 1, 2021, Fisher sold 10 percent (22,500 shares) of Bowden's outstanding shares for $338,000 in cash. Although it sold this interest, Fisher maintained the ability to significantly influence Bowden's decision-making process.
Prepare…
On January 1, 2020, Fisher Corporation purchased 40 percent (90,000 shares) of the common stock of Bowden, Inc., for $980,000 in cash and began to use the equity method for the investment. The price paid represented a $48,000 payment in excess of the book value of Fisher's share of Bowden's underlying net assets. Fisher was willing to make this extra payment because of a recently developed patent held by Bowden with a 15-year remaining life. All other assets were considered appropriately valued on Bowden's books.
Bowden declares and pays a $90,000 cash dividend to its stockholders each year on September 15. Bowden reported net income of $400,000 in 2020 and $348,000 in 2021. Each income figure was earned evenly throughout its respective years.
On July 1, 2021, Fisher sold 10 percent (22,500 shares) of Bowden's outstanding shares for $338,000 in cash. Although it sold this interest, Fisher maintained the ability to significantly influence Bowden's decision-making process.
Prepare…
On January 1, 2023, Fisher Corporation purchased 40 percent (70,000 shares) of the common stock of Bowden, Incorporated, for
$974,000 in cash and began to use the equity method for the investment. The price paid represented a $60,000 payment in excess of
the book value of Fisher's share of Bowden's underlying net assets. Fisher was willing to make this extra payment because of a
recently developed patent held by Bowden with a 15-year remaining life. All other assets were considered appropriately valued on
Bowden's books.
Bowden declares and pays a $102,000 cash dividend to its stockholders each year on September 15. Bowden reported net income of
$390,000 in 2023 and $342,000 in 2024. Each income figure was earned evenly throughout its respective years.
On July 1, 2024, Fisher sold 10 percent (17,500 shares) of Bowden's outstanding shares for $332,000 in cash. Although it sold this
interest, Fisher maintained the ability to significantly influence Bowden's decision-making process.…
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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