The equity method appropriate for strado investment

Assignment Help Financial Accounting

Reference no: EM131284764

At a total cost of $6,700,000, Veravo Corporation acquired 238,000 shares of Strado Corp. common stock as a long-term investment. Veravo Corporation uses the equity method of accounting for this investment. Strado Corp. has 700,000 shares of common stock outstanding, including the shares acquired by Veravo Corporation.

Required:

A. Journalize the entries by Veravo Corporation on December 31 to record the following information (refer to the Chart of Accounts for exact wording of account titles):

1. Strado Corp. reports net income of $967,000 for the current period.

2. A cash dividend of $0.29 per common share is paid by Strado Corp. during the current period.

B. Why is the equity method appropriate for the Strado Corp. investment?

Reference no: EM131284764

Questions Cloud

What are the tax advantages of transferring : What are the tax advantages of transferring T's taxes attributes to A? What transactional substitutes might T use to secure these advantages?

What was the value of the inventory : A company had inventory on November 1, of 5 units at a cost of $10 each. OnNovember 2, they purchased 19 units at $12 each. On November 6, they purchased15 units at $15 each. On November 8, 17 units were sold for $45 each. Using theLIFO perpetual inv..

What depreciation method was used : A machine was purchased on January 1, 2012 for $870,000, estimated salvage value $125,000 and estimated service life of 10 years. If the annual depreciation expense for 2015 was $94,818; what depreciation method was used? Round all answers to the nea..

Using variable costing or absorption costing : XYZ Manufacturing rewards the company's plant manager with a year-end bonus based on the increase in the plant's Net Income. For the purposes of determining the manager's bonus, should Net Income be calculated using Variable Costing or Absorption Cos..

The equity method appropriate for strado investment : At a total cost of $6,700,000, Veravo Corporation acquired 238,000 shares of Strado Corp. common stock as a long-term investment. Veravo Corporation uses the equity method of accounting for this investment. Strado Corp. reports net income of $967,000..

What factors motivate acquisition transactions : What is qualitative information? What is quantitative information. what factors motivate acquisition transactions? Which are the most important do you think?

Determine the amount of after-tax income : The lanier company incurs 60,000 of annual fixed costs in manufacturing and selling a product that it sells for $15 per unit. The variable costs of manufactuing and selling the product are $9 per unit. Determine the amount of after-tax income that th..

User Account

All Pages