What is the effect on posadas financial statements

Assignment Help Accounting Basics

Reference no: EM131959453

Problem

Posada Company acquired 7,000 of the 10,000 outstanding shares of Sabathia Company on January 1, 2013, for $840,000. The subsidiary's total fair value was assessed at $1,200,000 although its book value on that date was $1,130,000. The $70,000 fair value in excess of Sabathia's book value was assigned to a patent with a 5-year remaining life.

On January 1, 2015, Posada reported a $1,085,000 equity method balance in the Investment in Sabathia Company account. On October 1, 2015, Posada sells 1,000 shares of the investment for $191,000. During 2015, Sabathia reported net income of $120,000 and declared dividends of $40,000. These amounts are assumed to have occurred evenly throughout the year.

Question A: How should Posada report the 2015 income that accrued to the 1,000 shares prior to their sale?

Question B: What is the effect on Posada's financial statements from this sale of 1,000 shares?

Reference no: EM131959453

Questions Cloud

Guilty of the tort of negligence : Describe a travel and tourism example of a situation that you think might result in the suit for negligence.

How many units are in the average in-transit inventory : Their ordering costs are $20 per order. They operate 320 days per year. The in-transit shipping time for this item is 7 days.

Make the cash flows from operating activities section : Make the cash flows from operating activities section of the statement of cash flows for Parnell Company using the indirect method.

Accessible and effective in negotiating : Negotiators are more accessible and effective in negotiating within their own cultures than outside of them. When negotiations are between marketers

What is the effect on posadas financial statements : Posada Company acquired 7,000 of the 10,000 outstanding shares of Sabathia. What is the effect on Posada's financial statements from this sale of 1,000 shares?

Satisfaction scores increase profits for the hospital : How does great Press Ganey patient satisfaction scores increase profits for the hospital?

Conduct a performance evaluation meeting : Can someone help me discuss how you would best conduct a performance evaluation meeting with a subordinate. Importantly, detail how a supervisor

What is the value of the venture in year five : What is the issue price per share? What is the pre-money valuation? What is the value of the venture in year five using the direct capitalization method?

Calculate the promotion rate for level four : Calculate the promotion rate for level four, if 7 individuals in level three were promoted and the total number of personnel in level four is 63?

User Account

All Pages