Advanced Financial Accounting
12th Edition
ISBN: 9781259916977
Author: Christensen, Theodore E., COTTRELL, David M., Budd, Cassy
Publisher: Mcgraw-hill Education,
expand_more
expand_more
format_list_bulleted
Question
Chapter 4, Problem 4.3Q
To determine
Equity Method:
The equity method is used by the investing entity to record its investment in the investee entity. In this method, the investing company records its share in the profit of the investee company in its income statement. The investment value is also adjusted with the amount of share in profit or loss.
The equity method is applied only when the investing entity has significant influence over the investee entity.
To Indicate the factor which may cause to report lower income from 100% common share investment in an investee.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
BabyM owns 70% of 2Joints outstanding ordinary shares. 2Joints in turn, owns 20% investment in
Pacman Co. During 2021, BabyM earned a net income of P320,600 from its own operations while
2Joints suffered a loss of P60,000 excluding its share in the earning of its affiliates if any. Pacman
reported a net income of P43,500. 2Joints declared dividends of P250,000 from its accumulated profits
in previous years.
What is the consolidated profit for the year 2021?
Select the correct response:
267,190
261,100
269, 300
284,690
Lebron Co. owns most but not all of the shares of its subsidiaryBryant Inc. Lebron reported net income of$124,700. The amount to be attributed to the noncontrollinginterest in Bryant is $30,000. Indicate how Lebronwill report the noncontrolling interest in its incomestatement.
Gaw Company owns 15% of the common stock of Trace Corporation and used the fair-value method to account for this investment. Trace reported net income of $110,000 for 2018 and paid dividends of $60,000 on October 1, 2018. How much income should Gaw recognize on this investment in 2018?
What I have
110000 * .15= 16500
Chapter 4 Solutions
Advanced Financial Accounting
Ch. 4 - When is the carrying value of the investment...Ch. 4 - What is a differential? How is a differential...Ch. 4 - Prob. 4.3QCh. 4 - Prob. 4.4QCh. 4 - Prob. 4.5QCh. 4 - Prob. 4.6QCh. 4 - Prob. 4.7QCh. 4 - Prob. 4.8QCh. 4 - Prob. 4.9QCh. 4 - Prob. 4.10Q
Ch. 4 - Prob. 4.11QCh. 4 - What determines whether the balance assigned to...Ch. 4 - What does the termpushdown accountingmean?Ch. 4 - Under what conditions is push-down accounting...Ch. 4 - Prob. 4.15QCh. 4 - Prob. 4.2CCh. 4 - Prob. 4.3CCh. 4 - Prob. 4.4CCh. 4 - Prob. 4.1ECh. 4 - Prob. 4.2ECh. 4 - Prob. 4.3ECh. 4 - Prob. 4.4ECh. 4 - Prob. 4.5ECh. 4 - Prob. 4.6ECh. 4 - Prob. 4.7ECh. 4 - Prob. 4.8ECh. 4 - Prob. 4.9ECh. 4 - Prob. 4.10.1ECh. 4 - Prob. 4.10.2ECh. 4 - Prob. 4.10.3ECh. 4 - Prob. 4.10.4ECh. 4 - Prob. 4.10.5ECh. 4 - Prob. 4.11.1ECh. 4 - Prob. 4.11.2ECh. 4 - Prob. 4.11.3ECh. 4 - Prob. 4.11.4ECh. 4 - Prob. 4.12ECh. 4 - Prob. 4.13ECh. 4 - Prob. 4.14ECh. 4 - Prob. 4.15ECh. 4 - Prob. 4.16ECh. 4 - Prob. 4.17ECh. 4 - Prob. 4.18.1ECh. 4 - Prob. 4.18.2ECh. 4 - Prob. 4.18.3ECh. 4 - Prob. 4.18.4ECh. 4 - Prob. 4.18.5ECh. 4 - Prob. 4.18.6ECh. 4 - Prob. 4.19ECh. 4 - Prob. 4.20ECh. 4 - Prob. 4.21ECh. 4 - Prob. 4.22ECh. 4 - Prob. 4.23ECh. 4 - Prob. 4.24AECh. 4 - Prob. 4.25PCh. 4 - Prob. 4.26PCh. 4 - Prob. 4.27PCh. 4 - Consolidated Balance Sheet Powder Company spent...Ch. 4 - Prob. 4.29PCh. 4 - Prob. 4.30PCh. 4 - Prob. 4.31PCh. 4 - Prob. 4.32PCh. 4 - Prob. 4.33PCh. 4 - Prob. 4.34PCh. 4 - Prob. 4.35PCh. 4 - Prob. 4.36PCh. 4 - Prob. 4.37AP
Knowledge Booster
Similar questions
- 6. On January 1, 2020, PQR Company purchased 40,000 shares of Frank, Inc. at P100 per share. The investment is measured at fair value through other comprehensive income. Brokerage fees amounted to P120,000 were also paid by PQR. A P5 dividend per share was declared by Frank, Inc. on December 15, 2019, to be paid on March 31, 2020 to shareholders of record on January 31, 2020. What is the initial measurement of the investment in Frank, Inc.?arrow_forwardABC Co (a resident private company) owns 20% of the shares in XYX Co (a resident public company). Both companies have a corporate tax rate of 30% and a corporate tax rate for imputation purposes of 30%. XYX Co pays ABC Co a $70,000 dividend which has $12,000 of franking credits allocated to it (i.e. the franking percentage of the dividend is 40%). What are the relevant franking account entries for ABC Co and XYX Co? Assuming this is the only receipt of ABC Co, how much tax will it be required to pay? How would your answer be different if ABC Co was a non-resident company? (Maximum 250 words)arrow_forwardOn January 2, 2020, Tuao Company purchased 10% of Abulug Company’s outstanding ordinary shares for P20,000,000. Tuao is the largest single shareholder in Abulug and this gives Tuao the power to participate in the financial and operating policy decisions of the Abulug but is not control or joint control over those policies. Abulug reported profit of P10,000,000 and paid dividend of P4,000,000. What should be the balance in Tuao’s investment in Abulug Company at the end of 2020?arrow_forward
- Head owns 80% of Shoulders. Head reports Dividends of $300,000. Shoulders Report Net Income of $500,000 and Dividends of $100,000. How much dividends go to the noncontrolling interest shareholders? Are the dividends paid to the NCI shareholders an increase or reduction to NCI in stockholders equity?arrow_forward(Use the PFRS for SMEs) On December 31, 2021, Taher Co. acquired 30% of the ordinary shares that carry voting rights of entity B for P100,000. Taher Co. incurred transaction costs of P1,000 in acquiring these shares. Taher Co. has significant influence over entity B. Taher Co. uses the cost model to account for its investments in associates. In January 2022, entity B declared and paid a dividend of P20,000 out of profits earned in 2021. No further dividends were paid in 2022, 2023 or 2024. A published price quotation does not exist for entity B. At December 31, 2021, 2022 and 2023, in accordance with Section 27 Impairment of Assets, management assessed the fair values of its investment in entity B as P102,000, P110,000 and P90,000 respectively. Costs to sell are estimated at P4,000 throughout. Taher Co. measures its investment in entity B on December 31, 2021 at? Taher Co. measures its investment in entity B on December 31, 2022 at? The facts are the same as in the immediately…arrow_forwardDeMilo, Inc., owns 100 percent of the 40,000 outstanding shares of Ricardo, Inc. DeMilo currently carries the Investment in Ricardo account at $490,000 using the equity method.Ricardo issues 10,000 new shares to the public for $15.75 per share. How does this transaction affect the Investment in Ricardo account that appears on DeMilo’s financial records?arrow_forward
- XCorp and YCorp are each 100% owned by Xerxes. Xerxes has decided to amalgamate them without triggering tax by using Section 87 of the Income Tax Act. XCorp had 200 common shares with a PUC and ACB of $500, and a FMV of $5,000. YCorp has 100 common shares with a PUC and ACB of $700, and a FMV of $6,000. What is the PUC and ACB of the amalgamated company's shares? ) 11,000 600 1,200 500arrow_forwardhelp ty!arrow_forwardDeMilo, Inc., owns 100 percent of the 43,000 outstanding shares of Ricardo, Inc. DeMilo currently carries the Investment in Ricardo account at $346,400 using the equity method. Ricardo issues 7,000 new shares to the public for $11.75 per share. How does this transaction affect the Investment in Ricardo account that appears on DeMilo’s financial records?arrow_forward
- On January 2, 2020. Tuao Company purchased 10% of Abulug Company's outstanding ordinary shares for P20.000.000. Tuao is the largest single shareholder in Abulug and this gives Tuao the power to participate in the financial and operating policy decisions of the Abulug but is not control or joint control over those policies. Abulug reported profit of P10,000,000 and paid dividend of P4,000,000. What should be the balance in Tuao's investment in Abulug Company at the end of 2020? A. 21,000,000 B. 20,000,000 C. 21,400,000 D. 20,600,000arrow_forwardWendy Day Kite Company owns 40% of the outstanding stock of Strong String Company. During the current year, Strong String reported net income of $20 million. What effect does Strong String's reported net income have on Wendy Day's financial statements? Explain the reasoning for this effect.arrow_forwardNovak Limited owns a 26% interest in the shares of Marigold Corporation. During the year, Marigold pays $10600 in dividends to Novak and reports $104000 net income. Novak's investment in Marigold will increase Novak's net income by $10600. $27040. $2756. $29796. Please give correct option or incorrect all sub partarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
