The fair-value method to the equity method

Assignment Help Financial Accounting

Reference no: EM131294952

Dodge, Incorporated acquires 15% of Gates Corporation on January 1, 2011, for $105,000 when the book value of Gates was $600,000. During 2011 Gates reported net income of $150,000 and paid dividends of $50,000. On January 1, 2012, Dodge purchased an additional 25% of Gates for $200,000. Any excess cost over book value is attributable to goodwill with an indefinite life. The fair-value method was used during 2011 but Dodge has deemed it necessary to change to the equity method after the second purchase. During 2012 Gates reported net income of $200,000 and reported dividends of $75,000.

Prepare the journal entry to change from the fair-value method to the equity method.

Reference no: EM131294952

Questions Cloud

The grants would like to file joint tax return for the year : Bob (age 43) and Melissa Grant (age 43) are married and live in Lexington, Kentucky. The Grants have two children Jared, age 15, and Alese, age 12. The Grants would like to file a joint tax return for the year. The following information relates to th..

New sound system-write a journal entry : You purchased a new sound system that costs 2,500. You signed a six month 10% installment note payable for the cost of the sound system. The sound system has an estimated useful life of 5 years the residual salvage value is 100. Write a journal entry..

Prepare any journal entry necessary regarding : Clancy Incorporated, sold $210,000 of its inventory to Reid Company during 2011 for $350,000. Reid sold $224,000 of this merchandise in 2011 with the remainder to be disposed of during 2012. Assume Clancy owns 30% of Reid and applies the equity metho..

The fair-value method to the equity method : Dodge, Incorporated acquires 15% of Gates Corporation on January 1, 2011, for $105,000 when the book value of Gates was $600,000. During 2011 Gates reported net income of $150,000 and paid dividends of $50,000. On January 1, 2012, Dodge purchased an ..

Elaborate what may happen to other financial ratios : Please share your view on the following trends in the following financial ratios that you observe for a company. Please elaborate what may happen to other financial ratios when you observe these trends. Elaborate on the causes of these trends.

Determine the total overhead cost : Klumper Corporation is a diversified manufacturer of industrial goods. The company’s activity based costing system contains the following six activity cost pools and activity rates: Determine the total overhead cost that would be assigned to each of ..

Assuming no changes to selling price or costs : Victoria Company reports the following operating results for the month of April. Total Per Unit Sales (9,800 units) $519,400 $53 Variable costs 254,506 25.97 Contribution margin 264,894 $27.03 Fixed expenses 205,428 Net income $59,466 Management is c..

About the periodic inventory system : On September 12, Vander Company, Inc. sold merchandise in the amount of $2,500 to Jepson Company, with credit terms of 2/10, n/30. The cost of the items sold is $1,725. Vander uses the periodic inventory system. On September 14, Jepson returns some o..

User Account

All Pages