On February 1,20X5,Peter Co.purchased 20% of the outstanding shares of Mary Inc.at a cost of $275,000.During the next two fiscal years,Mary Inc.reported the following:

Required:
a.If Peter uses the cost method for recording its investment in Mary,what would the balance in the investment account be at January 31,20X7? What would be reported on the statement of comprehensive income with respect to this investment for 20X6 and 20X7?
b.If Peter uses the equity method for recording its investment in Mary,what would the balance in the investment account be at January 31,20X7? What would be reported on the statement of comprehensive income with respect to this investment?

Question

On February 1,20X5,Peter Co.purchased 20% of the outstanding shares of Mary Inc.at a cost of $275,000.During the next two fiscal years,Mary Inc.reported the following:
  
Required:
a.If Peter uses the cost method for recording its investment in Mary,what would the balance in the investment account be at January 31,20X7? What would be reported on the statement of comprehensive income with respect to this investment for 20X6 and 20X7?
b.If Peter uses the equity method for recording its investment in Mary,what would the balance in the investment account be at January 31,20X7? What would be reported on the statement of comprehensive income with respect to this investment?

Quizplus · Accepted Answer

The Answer of On February 1,20X5,Peter Co.purchased 20% of the outstanding shares of Mary Inc.at a cost of $275,000.During the next two fiscal years,Mary Inc.reported the following:
  
Required:
a.If Peter uses the cost method for recording its investment in Mary,what would the balance in the investment account be at January 31,20X7? What would be reported on the statement of comprehensive income with respect to this investment for 20X6 and 20X7?
b.If Peter uses the equity method for recording its investment in Mary,what would the balance in the investment account be at January 31,20X7? What would be reported on the statement of comprehensive income with respect to this investment?