Reference no: EM131219546
On July 1, 2011, Gibson Company acquired 75,000 of the outstanding shares of Miller Company for $12 per share. This acquisition gave Gibson a 35 percent ownership of Miller and allowed Gibson to significantly influence the investee’s decisions. As of July 1, 2011, the investee had assets with a book value of $2 million and liabilities of $400,000. At the time, Miller held equipment appraised at $150,000 above book value; it was considered to have a seven–year remaining life with no salvage value. Miller also held a copyright with a five–year remaining life on its books that was undervalued by $650,000. Any remaining excess cost was attributable to goodwill. Depreciation and amortization are computed using the straight–line method. Gibson applies the equity method for its investment in Miller. Miller’s policy is to pay a $1 per share cash dividend every April 1 and October 1. Miller’s income, earned evenly throughout each year, was $550,000 in 2011, $575,000 in 2012, and $620,000 in 2013. In addition, Gibson sold inventory costing $90,000 to Miller for $150,000 during 2012. Miller resold $80,000 of this inventory during 2012 and the remaining $70,000 during 2013.
a. Prepare a schedule computing the equity income to be recognized by Gibson during each of these years.
b. Compute Gibson’s investment in Miller Company’s balance as of December 31, 2013.
|
What impact has affirmative action had employment practices
: Discussions of affirmative action and its offshoot of reverse discrimination generally raise more heat than light. As a starting point, please read the case of Taxman v. Board of Education (see link below) that no matter what your personal views pres..
|
|
The average fixed cost per unit-average total cost per unit
: At an activity level of 8,800 units, Pember Corporation's total variable cost is $146,520 and its total fixed cost is $219,296. For the activity level of 8,900 units, compute the following values. (a) The total variable cost; (b) the total cost; (c) ..
|
|
Other items affected the stockholders equity account
: The accounts of Garfield Company with increases or decreases that occurred during the past year are as follows: Except for net income, an investment of $3000 by the owner, and a dividend paid of $11000, no other items affected the stockholder's equit..
|
|
Controller discovered that ending inventories
: In 2016, Winslow International, Inc.’s controller discovered that ending inventories for 2014 and 2015 were overstated by $200,000 and $500,000, respectively. Determine the effect of the errors on retained earnings at January 1, 2016. (Ignore income ..
|
|
Prepare schedule computing equity income to be recognized
: On July 1, 2011, Gibson Company acquired 75,000 of the outstanding shares of Miller Company for $12 per share. This acquisition gave Gibson a 35 percent ownership of Miller and allowed Gibson to significantly influence the investee’s decisions. Prepa..
|
|
Support services but serve markets in different industries
: On January 1, 2014, Ridge Road Company acquired 25 percent of the voting shares of Sauk Trail, Inc. for $4,100,000 in cash. Both companies provide commercial Internet support services but serve markets in different industries. How much of Ridge Road..
|
|
Following are preacquisition financial balances
: Following are preacquisition financial balances for Padre Company and Sol Company as of December 31. Also included are fair values for Sol Company accounts. Determine the value that would be shown in Padre’s consolidated financial statements for each..
|
|
Opened a factory to process and package landscape mulch
: This year Amber opened a factory to process and package landscape mulch. At the end of the year, Amber’s accountant prepared the following schedule for allocating manufacturing costs to the mulch inventory, but her accountant is unsure of what costs ..
|
|
Calculate machine depreciation using straight-line method
: A company has purchases a new machine for $7,500, and the machine is expected to have a residual value of $1,500 at the end of its six-year life. Calculate the machine's depreciation using the straight-line method:
|