Advanced Accounting
14th Edition
ISBN: 9781260247824
Author: Joe Ben Hoyle, Thomas F. Schaefer, Timothy S. Doupnik
Publisher: RENT MCG
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 1, Problem 25P
Matthew, Inc., owns 30 percent of the outstanding stock of Lindman Company and has the ability to significantly influence the investee’s operations and decision making. On January 1, 2021, the balance in the Investment in Lindman account is $335,000. Amortization associated with this acquisition is $9,000 per year. In 2021, Lindman earns an income of $90,000 and declares cash dividends of $30,000. Previously, in 2020, Lindman had sold inventory costing $24,000 to Matthew for $40,000. Matthew consumed all but 25 percent of this merchandise during 2020 and used the rest during 2021. Lindman sold additional inventory costing $28,000 to Matthew for $50,000 in 2021. Matthew did not consume 40 percent of these 2021 purchases from Lindman until 2022.
a. What amount of equity method income would Matthew recognize in 2021 from its ownership interest in Lindman?
b. What is the equity method balance in the Investment in Lindman account at the end of 2021?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Matthew, Inc., owns 30 percent of the outstanding stock of Lindman Company and has the ability to significantly influence the investee’s operations and decision making. On January 1, 2021, the balance in the Investment in Lindman account is $365,000. Amortization associated with this acquisition is $12,600 per year. In 2021, Lindman earns an income of $132,000 and declares cash dividends of $33,000. Previously, in 2020, Lindman had sold inventory costing $33,600 to Matthew for $56,000. Matthew consumed all but 20 percent of this merchandise during 2020 and used the rest during 2021. Lindman sold additional inventory costing $44,800 to Matthew for $80,000 in 2021. Matthew did not consume 40 percent of these 2021 purchases from Lindman until 2022.
What amount of equity method income would Matthew recognize in 2021 from its ownership interest in Lindman?
What is the equity method balance in the Investment in Lindman account at the end of 2021?
Surrell Inc. owns 30% of the outstanding voting common stock of Vicker Co. and has the ability to significantly influence the investee's operations and decision
making. On January 1, 2019, the balance in the Investment in Vicker Co. account was $402,000. Amortization associated with this acquisition is $10,800 per
year. During 2019, Vicker earned an income of $108,000 and paid cash dividends of $36,000. Previously in 2018, Vicker had sold inventory costing $28,800 to
Surrell for $48,000. All but 25% of this merchandise was consumed by Surrell during 2018. The remainder was used during the first few weeks of 2019.
Additional sales were made to Surrell in 2019; inventory costing $33,600 was transferred at a price of $60,000. Of this total, 40% was not consumed until 2020.
What amount of equity income would Surrell have recognized in 2019 from its ownership interest in Vicker? $9,936. $24,840. $19,872. $21,114. $18,948.
Matthew, Inc. owns 30 percent of the outstanding stock of Lindman Company and has the ability to significantly influence the
investee's operations and decision making. On January 1, 2018, the balance in the Investment in Lindman account is $422,000.
Amortization associated with this acquisition is $15.000 per year. In 2018, Lindman earns an income of $138,000 and declares cash
dividends of $46,000. Previously, in 2017, Lindman had sold inventory costing $35,000 to Matthew for $50,000. Matthew consumed allI
but 25 percent of this merchandise during 2017 and used the rest during 2018. Lindman sold additional inventory costing $42,900 to
Matthew for $65,000 in 2018. Matthew did not consume 40 percent of these 2018 purchases from Lindman until 2019.
a. What amount of equity method income would Matthew recognize in 2018 from its ownership interest in Lindman?
b. What is the equity method balance in the Investment in Lindman account at the end of 2018?
a.
Equity income
b.
Investment in…
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
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Matthew, Inc. owns 30 percent of the outstanding stock of Lindman Company and has the ability to significantly influence the investee’s operations and decision making. On January 1, 2018, the balance in the Investment in Lindman account is $335,000. Amortization associated with this acquisition is $9,000 per year. In 2018, Lindman earns an income of $90,000 and declares cash dividends of $30,000. Previously, in 2017, Lindman had sold inventory costing $24,000 to Matthew for $40,000. Matthew consumed all but 25 percent of this merchandise during 2017 and used the rest during 2018. Lindman sold additional inventory costing $28,000 to Matthew for $50,000 in 2018. Matthew did not consume 40 percent of these 2018 purchases from Lindman until 2019.a. What amount of equity method income would Matthew recognize in 2018 from its ownership interest in Lindman?b. What is the equity method balance in the Investment in Lindman account at the end of 2018?arrow_forwardMatthew, Incorporated owns 30 percent of the outstanding stock of Lindman Company and has the ability to significantly influence the investee's operation and decision making. On January 1, 2024, the balance in the Investment in Lindman account is $409,000. Amortization associated with this acquisition is $11,400 per year. In 2024, Lindman earns an income of $83,000 and declares cash dividends of $41,500. Previously, in 2023, Lindman had sold inventory costing $50,400 to Matthew for $72,000. Matthew consumed all but 25 percent of this merchandise during 2023 and used the rest during 2024. Lindman sold additional inventory costing $59,400 to Matthew for $90,000 in 2024. Matthew did not consume 40 percent of these 2024 purchases from Lindman until 2025. Matthew Incorporated ownership in Lindman Matthew Investment in Lindman Amortization Lindman 2024 Income Lindman 2024 Dividends Lindman Inventory Sales to Matthew 2023 Inventory Sale 2024 Inventory Sale Gross Profit Calculations Sales Cost…arrow_forwardMatthew, Inc., owns 30 percent of the outstanding stock of Lindman Company and has the ability to significantly influence the investee's operations and decision making. On January 1, 2021, the balance in the Investment in Lindman account is $382,000. Amortization of excess fair value associated with the 30% ownership is $10,500 per year. In 2021, Lindman earns an income of $156,000 and declares cash dividends of $39,000. Previously, in 2020, Lindman had sold inventory costing $54, 600 to Matthew for $78,000. Matthew consumed all but 20 percent of this merchandise during 2020 and used the rest during 2021. Lindman sold additional inventory costing $59, 400 to Matthew for $90,000 in 2021. Matthew did not consume 40 percent of these 2021 purchases from Lindman until 2022. What amount of equity method income would Matthew recognize in 2021 from its ownership interest in Lindman? What is the equity method balance in the Investment in Lindman account at the end of 2021?arrow_forward
- Matthew Inc. owns 30 percent of the outstanding stock of Lindman Company and has the ability to significantly influence the investee's operations and decision making. On January 1, 2018, the balance in the Investment in Lindman account is $335,000. Amortization associated with this acquisition is $9,000 per year. In 2018, Lindman earns an income of $90,000 and declares cash dividends of $30,000. Previously, in 2017, Lindman had sold inventory costing $24,000 to Matthew for $40,000. Matthew consumed all but 25 percent of this merchandise during 2017 and used the rest during 2018. Lindman sold additional inventory costing $28,000 to Matthew for $50,000 in 2018. Matthew did not consume 40 percent of these 2018 purchases from Lindman until 2019. What amount of equity method income would Matthew recognize in 2018 from its ownership interest in Lindman? What is the equity method balance in the Investment in Lindman account at the end of 2018? I need help with the second part (#2) since…arrow_forwardMatthew, Inc., owns 30 percent of the outstanding stock of Lindman Company and has the ability to significantly influence the investee's operations and decision making. On January 1, 2021, the balance in the Investment in Lindman account is $335,000. Amortization of excess fair value associated with the 30 percent ownership is $9,000 per year. In 2021, Lindman earns an income of $90,000 and declares cash dividends of $30,000. Previously, in 2020. Lindman had sold inventory costing $24,000 to Matthew for $40,000. Matthew consumed all but 25 percent of this merchandise during 2020 and used the rest during 2021. Lindman sold additional inventory costing $28,000 to Matthew for $50,000 in 2021. Matthew did not consume 40 percent of these 2021 purchases from Lindman until 2022. a. What amount of equity method income would Matthew recognize in 2021 from its ownership interest in Lindman? b. What is the equity method balance in the Investment in Lindman account at the end of 2021?arrow_forwardOn January 2, 2021, Howdy Doody Corporation purchased 15% of Ranger Corporation's common stock for $80,000. During 2021, Ranger had net income of $120,000 and declared and paid a dividend of $40,000. On December 31, 2021, the fair value of the Ranger stock owned by Howdy Doody had increased to $90,000. How much should Howdy Doody show in the 2021 income statement as income from this investment? Answer: $arrow_forward
- Jackson Inc. purchased 30,000 shares of common stock of the Pixel Corporation for $10 per share on January 2, 2020. During 2020, Pixel had 100,000 shares of common stock outstanding, reported net income of $200,000, and paid cash dividends of $100,000. The fair value of Pixel stock on December 31, 2020 is $12 per share. On December 31, 2020, what will Jackson report on its Balance Sheet for its investment in Pixel? How much revenue should Jackson report for 2020 on its investment in Pixel? Round your answers to the nearest whole number. Dot not use dollar signs($) or commas(,). Blank # 1 Blank # 2arrow_forwardOn July 1, 2021, JKJ Corporation purchased 100 common shares of JMK Ltd. at $20 per share. JKJ expected to be able to sell this investment within a year at $28 per share. Dividends of $1 per share were declared and paid on August 1, 2021. On December 31, 2021, the fair value of each share was $23. What balance was shown in the investment account on JKJ's balance sheet on December 31 (year end)? $2,300 $2,400 $2,000 $2,800arrow_forwardOn January 1, 2025, Vaughn Corporation purchased 20% of the common shares of Bramble Company for $196,000. During the year, Bramble earned net income of $77,000 and paid dividends of $19,250. Prepare the entries for Vaughn to record the purchase and any additional entries related to this investment in Bramble Company in 2025. (List all debit entries before credit entries. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts.)arrow_forward
- On December 1, 2020, Citrus purchased 200,000 shares representing 45 percent of the outstanding stock of Berry for cash of P2,500,000. As a result of this purchase, Citrus has the ability to exercise significant influence over the operating and financial policies of Berry. 45 percent of the profit of Berry amounted to P20,000 for the month of December and P350,000 for the year ended December 31, 2020. On January 15, 2021, cash dividends of PO.30 per share were paid to shareholders of record on December 31, 2020. Citrus' longterm investment in Berry should be shown in Citrus' December 31, 2020, statement of financial position at:arrow_forwardOn July 1, 2019, Killearn Company acquired 120,000 of the outstanding shares of Shaun Company for $15 per share. This acquisition gave Killearn a 20 percent ownership of Shaun and allowed Killearn to significantly influence the investee’s decisions. As of July 1, 2019, the investee had assets with a book value of $7 million and liabilities of $148,000. At the time, Shaun held equipment appraised at $581,000 more than book value; it was considered to have a seven-year remaining life with no salvage value. Shaun also held a copyright with a five-year remaining life on its books that was undervalued by $1,235,000. Any remaining excess cost was attributable to goodwill. Depreciation and amortization are computed using the straight-line method. Killearn applies the equity method for its investment in Shaun. Shaun's policy is to declare and pay a $1 per share cash dividend every April 1 and October 1. Shaun's income, earned evenly throughout each year, was $566,000 in 2019, $593,400 in…arrow_forwardOn July 1, 2019, Killearn Company acquired 88,000 of the outstanding shares of Shaun Company for $13 per share. This acquisition gave Killearn a 25 percent ownership of Shaun and allowed Killearn to significantly influence the investee’s decisions. As of July 1, 2019, the investee had assets with a book value of $3 million and liabilities of $74,400. At the time, Shaun held equipment appraised at $364,000 more than book value; it was considered to have a seven-year remaining life with no salvage value. Shaun also held a copyright with a five-year remaining life on its books that was undervalued by $972,000. Any remaining excess cost was attributable to goodwill. Depreciation and amortization are computed using the straight-line method. Killearn applies the equity method for its investment in Shaun. Shaun’s policy is to declare and pay a $1 per share cash dividend every April 1 and October 1. Shaun’s income, earned evenly throughout each year, was $598,000 in 2019, $639,600 in 2020,…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning
Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning
How To Analyze an Income Statement; Author: Daniel Pronk;https://www.youtube.com/watch?v=uVHGgSXtQmE;License: Standard Youtube License