Reference no: EM132873715

Questions-

Q1. During the start of the current year, Holland Co. bought 30,000 shares of an investee's 200,000 outstanding inventory shares for $6,000,000. On that date, the carrying amount of the acquired shares was $4,000,000. The entity attributed the excess of cost over carrying amount to patent with remaining useful life of 10 years. During the year, Disgust Company's officers gained a majority on the investee's board of directors. The investee reported earnings of $5,000,000 for the year and paid dividend of $3,000,000 at year-end. What amount is the balance of "investment in associate" at the current year-end?

Q2. Faye Co. owned 20% of Pen Inc.'s preference share capital and 50% of the ordinary share capital. Pen Inc.'s share capital outstanding comprised the following at year-end:

10% cumulative preference share capital - 2,000,000

Ordinary share capital - 7,000,000

Pen Inc. reported net income of $5,000,000 for the current year.

a. What amount is the balance of Investment in Pen Inc. at the end of the current year?

b. How much should be recorded as investment income for the current year assuming that the preference share capital of Pen Inc. are non-cumulative?

c. How much should be recorded as investment income for the current year assuming that the preference share capital of Pen Inc. are non-cumulative and that Pen Inc. paid $1,000,000 cash dividends for the current year?

d. Assuming that the preference share capital of Pen Inc. are non-cumulative and that Pen Inc. paid $1,000,000 cash dividends for the current year. What amount should be the balance of Investment in Pen Inc. at the end of the end of the current year?