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Advanced Accounting 11th Edition by Paul Fischer,William Tayler, Rita Cheng
Edition 11ISBN: 978-0538480284Advanced Accounting 11th Edition by Paul Fischer,William Tayler, Rita Cheng
Edition 11ISBN: 978-0538480284 Exercise 7
Tucker Corporation purchases a 25% interest in Lincoln Company for $120,000 on January 1, 2017. The following determination and distribution of excess schedule is prepared: 
Lincoln Company earns income of $25,000 in 2017 and $30,000 in 2018. Lincoln Company declares a 25-cent per-share cash dividend on December 22, 2018, payable January 12, 2019, to stockholders of record on December 30, 2018.
During 2018, Lincoln sells merchandise costing $10,000 to Tucker for $15,000. Twenty percent of the merchandise is still in Tucker's ending inventory on December 31, 2018. The fair value of the investment is $135,000 on December 31, 2017, and $145,000 on December 31, 2018.
1. Assuming the use of the equity method, prepare the adjustment on Tucker's books on December 31, 2017, and December 31, 2018, to account for its investment in Lincoln Company. Assume Tucker Corporation makes no adjustment except at the end of each calendar year. Ignore income tax considerations.
2. Assuming the use of the fair value option, prepare the adjustment on Tucker's books on December 31, 2017, and December 31, 2018, to account for its investment in Lincoln Company. Assume Tucker Corporation makes no adjustment except at the end of each calendar year. Ignore income tax considerations.
Lincoln Company earns income of $25,000 in 2017 and $30,000 in 2018. Lincoln Company declares a 25-cent per-share cash dividend on December 22, 2018, payable January 12, 2019, to stockholders of record on December 30, 2018.
During 2018, Lincoln sells merchandise costing $10,000 to Tucker for $15,000. Twenty percent of the merchandise is still in Tucker's ending inventory on December 31, 2018. The fair value of the investment is $135,000 on December 31, 2017, and $145,000 on December 31, 2018.
1. Assuming the use of the equity method, prepare the adjustment on Tucker's books on December 31, 2017, and December 31, 2018, to account for its investment in Lincoln Company. Assume Tucker Corporation makes no adjustment except at the end of each calendar year. Ignore income tax considerations.
2. Assuming the use of the fair value option, prepare the adjustment on Tucker's books on December 31, 2017, and December 31, 2018, to account for its investment in Lincoln Company. Assume Tucker Corporation makes no adjustment except at the end of each calendar year. Ignore income tax considerations.
Explanation
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1)Calculate adjustment income:
It is giv...
Advanced Accounting 11th Edition by Paul Fischer,William Tayler, Rita Cheng
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