Belden, Inc., acquires 30 percent of the outstanding voting shares of Sheffield, Inc., on January 1, 2020, for $322,000, which gives Belden the ability to significantly influence Sheffield. Sheffield has a net book value of $828,000 at January 1, 2020. Sheffield's asset and liability accounts showed carrying amounts considered equal to fair values, except for a copyright whose value accounted for Belden's excess cost over book value in its 30 percent purchase. The copyright had a remaining life of 16 years at January 1, 2020. No goodwill resulted from Belden's share purchase. Sheffield reported net income of $178,000 in 2020 and $248,000 of net income during 2021. Dividends of $62,000 and $84,000 are declared and paid in 2020 and 2021, respectively. Belden uses the equity method. a. On its 2021 comparative income statements, how much income would Belden report for 2020 and 2021 in connection with the company's investment in Sheffield? b. If Belden sells its entire investment in Sheffield on January 1, 2022, for $412,000 cash, what is the impact on Belden's income? c. Assume that Belden sells inventory to Sheffield during 2020 and 2021 as follows: Year 2020 2021 Cost to Price to Belden $24,780 32,450 Sheffield $42,000 59,000 Year-End Balance (at Transfer Price) $18,000 (sold in following year) 40,000 (sold in following year)
Belden, Inc., acquires 30 percent of the outstanding voting shares of Sheffield, Inc., on January 1, 2020, for $322,000, which gives Belden the ability to significantly influence Sheffield. Sheffield has a net book value of $828,000 at January 1, 2020. Sheffield's asset and liability accounts showed carrying amounts considered equal to fair values, except for a copyright whose value accounted for Belden's excess cost over book value in its 30 percent purchase. The copyright had a remaining life of 16 years at January 1, 2020. No goodwill resulted from Belden's share purchase. Sheffield reported net income of $178,000 in 2020 and $248,000 of net income during 2021. Dividends of $62,000 and $84,000 are declared and paid in 2020 and 2021, respectively. Belden uses the equity method. a. On its 2021 comparative income statements, how much income would Belden report for 2020 and 2021 in connection with the company's investment in Sheffield? b. If Belden sells its entire investment in Sheffield on January 1, 2022, for $412,000 cash, what is the impact on Belden's income? c. Assume that Belden sells inventory to Sheffield during 2020 and 2021 as follows: Year 2020 2021 Cost to Price to Belden $24,780 32,450 Sheffield $42,000 59,000 Year-End Balance (at Transfer Price) $18,000 (sold in following year) 40,000 (sold in following year)
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter13: Investments And Long-term Receivables
Section: Chapter Questions
Problem 8MC
Related questions
Question
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps with 2 images
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.Recommended textbooks for you
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning