Determine the equity income to be recognized

Reference no: EM13271161

On July 1, 2013, Killearn Company acquired 78,000 of the outstanding shares of Shaun Company for $15 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, 2013, the investee had assets with a book value of $3 million and liabilities of $148,400. At the time, Shaun held equipment appraised at $322,000 above 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 $1,232,000. 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 $604,000 in 2013, $637,200 in 2014, and $694,600 in 2015.
In addition, Killearn sold inventory costing $93,600 to Shaun for $156,000 during 2014. Shaun resold $105,500 of this inventory during 2014 and the remaining $50,500 during 2015.

a. Determine the equity income to be recognized by Killearn during each of these years.

b. Killearn's investment in Shaun Company's balance as of December 31, 2015.

Reference no: EM13271161

Questions Cloud

A hypothetical person who is riding along with the pion : A particle known as a pion lives for a short time before breaking apart into other particles. Suppose a pion is moving at a speed of 0.990c, and an observer who isstationary in a laboratory measures the pion's lifetime to be ? . What is the lif..

Compute the consolidated gain or loss on a consolidated inco : Keenan Company has had bonds payable of $20,000 outstanding for several years.

Computer the non-controlling interest : Computer the non-controlling interest in Smith at the date of acquisition

Deal with uncertainty in the budget-preparation process : Which one of the following is not a way to deal with uncertainty in the budget-preparation process?

Determine the equity income to be recognized : Determine the equity income to be recognized by Killearn during each of these years.

The directors decide to declare total dividend : Assuming that the directors decide to declare total dividends in the amount of $366,000, determine how much each class of stock should receive under each of the conditions stated below. One year's dividends are in arrears on the preferred stock

The skeletal structure for trans-1-ethyl-4-iodocyclohexane : Draw the skeletal structure for trans-1-ethyl-4-iodocyclohexane. Make sure the tapered end, i.e. the thin end, of the wedge bond is attached to the parent.

What pressure does she exert on the floor : A 51.0-kg woman wearing high-heeled shoes is invited into a home in which the kitchen has vinyl floor covering. If the woman balances on one heel, what pressure does she exert on the floor

Customer expectations-customer relationship management : Of the two types of customer expectations, adequate performance expectations fluctuate the most. Describe situations that might cause adequate expectations to increase, thereby narrowing the width of the zone of tolerance. What might a firm do in the..

User Account

All Pages