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Assume an investee has the following financial statement information for the three years ending December 31, 2019: (At December 31) Current assets Tangible fixed assets Intangible assets 2019 2018 2017 $285,000 $277,500 $207,000 662,500 575,000 563,000 40,000 75,000 50,000 $987,500 $897,500 $820,000 $120,000 $110,000 $100,000 266,250 242,500 220,000 100,000 100,000 100,000 100,000 100,000 100,000 400,000 345,000 300,000 600,000 545,000 500,000 Total assets Current liabilities Noncurrent liabilities Common stock Additional paid-in capital Retained earnings Stockholders' equity Total liabilities and equity $986,250 $897,500 $820,000 (For the years ended December 31) 2019 Revenues Expenses Net income Dividends 2018 2017 $970,000 $920,000 $850,000 875,000 840,000 775,000 $95,000 $80,000 $75,000 $40,000 $35,000 $25,000 Assume that on January 1, 2017, an investor company purchased 100% of the outstanding voting common stock of the investee. On the date of the acquisition, the investee's identifiable net assets had fair values that approximated their historical book values. In addition, the acquisition resulted in no goodwill or bargain purchase gain recognized in the consolidated financial statements of the investor company. Assuming that the investor company uses the cost method to account for its investment in the investee, what is the balance in the "income from investee" account in the investor company's pre-consolidation income statement for the year onded December 21, 20192

Assume an investee has the following financial statement information for the three years ending December 31, 2019: (At December 31) Current assets Tangible fixed assets Intangible assets 2019 2018 2017 $285,000 $277,500 $207,000 662,500 575,000 563,000 40,000 75,000 50,000 $987,500 $897,500 $820,000 $120,000 $110,000 $100,000 266,250 242,500 220,000 100,000 100,000 100,000 100,000 100,000 100,000 400,000 345,000 300,000 600,000 545,000 500,000 Total assets Current liabilities Noncurrent liabilities Common stock Additional paid-in capital Retained earnings Stockholders' equity Total liabilities and equity $986,250 $897,500 $820,000 (For the years ended December 31) 2019 Revenues Expenses Net income Dividends 2018 2017 $970,000 $920,000 $850,000 875,000 840,000 775,000 $95,000 $80,000 $75,000 $40,000 $35,000 $25,000 Assume that on January 1, 2017, an investor company purchased 100% of the outstanding voting common stock of the investee. On the date of the acquisition, the investee's identifiable net assets had fair values that approximated their historical book values. In addition, the acquisition resulted in no goodwill or bargain purchase gain recognized in the consolidated financial statements of the investor company. Assuming that the investor company uses the cost method to account for its investment in the investee, what is the balance in the "income from investee" account in the investor company's pre-consolidation income statement for the year onded December 21, 20192

Cornerstones of Financial Accounting
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
ChapterA2: Investments
Section: Chapter Questions
Problem 17E
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Review of pre-consolidation cost method (controlling investment in affiliate, fair value equals book value) Assume an investee has the following financial statement information for the three years ending December 31, 2019: (At December 31) Current assets Tangible fixed assets Intangible assets Total assets 2019 2018 2017 Current liabilities Noncurrent liabilities Common stock Additional paid-in capital Retained earnings Stockholders' equity $285,000 $277,500 $207,000 662,500 575,000 563,000 40,000 75,000 50,000 $987,500 $897,500 $820,000 $120,000 $110,000 $100,000 266,250 242,500 220,000 100,000 100,000 100,000 100,000 100,000 100,000 400,000 345,000 300,000 600,000 545,000 500,000 Total liabilities and equity $986,250 $897,500 $820,000 (For the years ended December 31) 2019 Revenues Expenses Net income Dividends 2018 2017 $970,000 $920,000 $850,000 875,000 840,000 775,000 $95,000 $80,000 $75,000 $40,000 $35,000 $25,000 Assume that on January 1, 2017, an investor company purchased 100% of the outstanding voting common stock of the investee. On the date of the acquisition, the investee's identifiable net assets had fair values that approximated their historical book values. In addition, the acquisition resulted in no goodwill or bargain purchase gain recognized in the consolidated financial statements of the investor company. Assuming that the investor company uses the cost method to account for its investment in the investee, what is the balance in the "income from investee" account in the investor company's pre-consolidation income statement for the year ended December 31, 2019?
Transcribed Image Text:Review of pre-consolidation cost method (controlling investment in affiliate, fair value equals book value) Assume an investee has the following financial statement information for the three years ending December 31, 2019: (At December 31) Current assets Tangible fixed assets Intangible assets Total assets 2019 2018 2017 Current liabilities Noncurrent liabilities Common stock Additional paid-in capital Retained earnings Stockholders' equity $285,000 $277,500 $207,000 662,500 575,000 563,000 40,000 75,000 50,000 $987,500 $897,500 $820,000 $120,000 $110,000 $100,000 266,250 242,500 220,000 100,000 100,000 100,000 100,000 100,000 100,000 400,000 345,000 300,000 600,000 545,000 500,000 Total liabilities and equity $986,250 $897,500 $820,000 (For the years ended December 31) 2019 Revenues Expenses Net income Dividends 2018 2017 $970,000 $920,000 $850,000 875,000 840,000 775,000 $95,000 $80,000 $75,000 $40,000 $35,000 $25,000 Assume that on January 1, 2017, an investor company purchased 100% of the outstanding voting common stock of the investee. On the date of the acquisition, the investee's identifiable net assets had fair values that approximated their historical book values. In addition, the acquisition resulted in no goodwill or bargain purchase gain recognized in the consolidated financial statements of the investor company. Assuming that the investor company uses the cost method to account for its investment in the investee, what is the balance in the "income from investee" account in the investor company's pre-consolidation income statement for the year ended December 31, 2019?
Assume that on January 1, 2017, an investor company purchased 100% of the outstanding voting common stock of the investee. On the date of the acquisition, the investee's identifiable net assets had fair values that approximated their historical book values. In addition, the acquisition resulted in no goodwill or bargain purchase gain recognized in the consolidated financial statements of the investor company. Assuming that the investor company uses the cost method to account for its investment in the investee, what is the balance in the "income from investee" account in the investor company's pre-consolidation income statement for the year ended December 31, 2019? $40,000 $95,000 $75,000 $55,000
Transcribed Image Text:Assume that on January 1, 2017, an investor company purchased 100% of the outstanding voting common stock of the investee. On the date of the acquisition, the investee's identifiable net assets had fair values that approximated their historical book values. In addition, the acquisition resulted in no goodwill or bargain purchase gain recognized in the consolidated financial statements of the investor company. Assuming that the investor company uses the cost method to account for its investment in the investee, what is the balance in the "income from investee" account in the investor company's pre-consolidation income statement for the year ended December 31, 2019? $40,000 $95,000 $75,000 $55,000
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