Ford Corporation paid $10,200,000 for a 47% interest in Allen Corporation on January 1,2014 when Allen had the following identifiable assets and liabilities:

At the time of Ford's purchase,the fixed assets had a remaining life of 8 years.For the year ended December 31,2014,Allen reported sales of $9 million and expenses of $5 million and declared and paid dividends of $1 million.At December 31,2014,Allen reported the following balance sheet information:
Required:
1.Give the income statement and balance sheet accounts and amounts as they would appear on Ford's financial statements under the equity method for the year ended December 31,2014.Be sure to show calculations.
2.Explain how your answer to requirement 'a' would change if Ford determined that it actually controlled Allen and had to consolidate its investment.Give specific income statement and balance sheet accounts and amounts where possible.Be sure to show calculations.

Question

Ford Corporation paid $10,200,000 for a 47% interest in Allen Corporation on January 1,2014 when Allen had the following identifiable assets and liabilities:
 
At the time of Ford's purchase,the fixed assets had a remaining life of 8 years.For the year ended December 31,2014,Allen reported sales of $9 million and expenses of $5 million and declared and paid dividends of $1 million.At December 31,2014,Allen reported the following balance sheet information:  
Required:
1.Give the income statement and balance sheet accounts and amounts as they would appear on Ford's financial statements under the equity method for the year ended December 31,2014.Be sure to show calculations.
2.Explain how your answer to requirement 'a' would change if Ford determined that it actually controlled Allen and had to consolidate its investment.Give specific income statement and balance sheet accounts and amounts where possible.Be sure to show calculations.

Quizplus · Accepted Answer

The Answer of Ford Corporation paid $10,200,000 for a 47% interest in Allen Corporation on January 1,2014 when Allen had the following identifiable assets and liabilities:
 
At the time of Ford's purchase,the fixed assets had a remaining life of 8 years.For the year ended December 31,2014,Allen reported sales of $9 million and expenses of $5 million and declared and paid dividends of $1 million.At December 31,2014,Allen reported the following balance sheet information:  
Required:
1.Give the income statement and balance sheet accounts and amounts as they would appear on Ford's financial statements under the equity method for the year ended December 31,2014.Be sure to show calculations.
2.Explain how your answer to requirement 'a' would change if Ford determined that it actually controlled Allen and had to consolidate its investment.Give specific income statement and balance sheet accounts and amounts where possible.Be sure to show calculations.

Ford Corporation Paid $10,200,000 for a 47% Interest in Allen