Company purchased 40% of Snuggie Corporation on January 1, 2014 for $150,000.Snuggie Corporation's balance sheet at the time of acquisition was as follows:

During 2014, Snuggie Corporation reported net income of $30,000 and paid dividends of $9,000.The fair values of Snuggie's assets and liabilities were equal to their book values at the date of acquisition, with the exception of Building and Equipment, which had a fair value of $35,000 above book value.All buildings and equipment had a remaining useful life of five years at the time of the acquisition.The amount attributed to goodwill as a result of the acquisition in not impaired.
Required:
A.What amount of investment income will Pinta record during 2014 under the equity method of accounting?
B.What amount of income will Pinta record during 2014 under the cost method of accounting?
C.What will be the balance in the investment account on December 31, 2014 under the cost and equity method of accounting?

Question

Company purchased 40% of Snuggie Corporation on January 1, 2014 for $150,000.Snuggie Corporation's balance sheet at the time of acquisition was as follows:
  
During 2014, Snuggie Corporation reported net income of $30,000 and paid dividends of $9,000.The fair values of Snuggie's assets and liabilities were equal to their book values at the date of acquisition, with the exception of Building and Equipment, which had a fair value of $35,000 above book value.All buildings and equipment had a remaining useful life of five years at the time of the acquisition.The amount attributed to goodwill as a result of the acquisition in not impaired.
Required:
A.What amount of investment income will Pinta record during 2014 under the equity method of accounting?
B.What amount of income will Pinta record during 2014 under the cost method of accounting?
C.What will be the balance in the investment account on December 31, 2014 under the cost and equity method of accounting?

Quizplus · Accepted Answer

The Answer of Company purchased 40% of Snuggie Corporation on January 1, 2014 for $150,000.Snuggie Corporation's balance sheet at the time of acquisition was as follows:
  
During 2014, Snuggie Corporation reported net income of $30,000 and paid dividends of $9,000.The fair values of Snuggie's assets and liabilities were equal to their book values at the date of acquisition, with the exception of Building and Equipment, which had a fair value of $35,000 above book value.All buildings and equipment had a remaining useful life of five years at the time of the acquisition.The amount attributed to goodwill as a result of the acquisition in not impaired.
Required:
A.What amount of investment income will Pinta record during 2014 under the equity method of accounting?
B.What amount of income will Pinta record during 2014 under the cost method of accounting?
C.What will be the balance in the investment account on December 31, 2014 under the cost and equity method of accounting?

Company Purchased 40% of Snuggie Corporation on January 1, 2014