Question
In: Accounting
On January 2, 2018, All Good Company purchased 7,000 shares of the stock of Big Bad...
On January 2, 2018, All Good Company purchased 7,000 shares of the stock of Big Bad Company, and DID obtain significant influence. The investment is intended as a long-term investment. The stock was purchased for $11 per share, and represents a 30% ownership stake. Big Bad Company made $300,000 of net income in 2018, and paid dividends to All Good Company of $40,000 on December 15, 2018. Big Bad Company's stock was trading on the open market for $19 per share at the end of the year. Use this information to determine the book value of the investment that should be reported at year end by All Good Company. Round to nearest whole dollar.
Solutions
Expert Solution
Answer:
Given that:
All Good Company purchased 7000 shares (30% ownership) of the stock of Big Bad Company, and did obtain significant influence.
As such Equity method of accounting would be applicable for the investment.
The book value of the investment that should be reported at year end by All Good Company = $127,000
ekkarill92 answered 2 years agoRelated Solutions
On January 2, 2018, All Good Company purchased 7,000 shares of the stock of Big Bad Company, and DID obtain significant influence.
On January 2, 2018, All Good Company purchased 7,000
shares of the stock of Big Bad Company, and DID obtain significant
influence. The investment is intended as a long-term
investment. The stock was purchased for $15 per share,
and represents a 30% ownership stake. Big Bad Company made $450,000
of net income in 2018, and paid dividends to All Good Company of
$20,000 on December 15, 2018. Big Bad Company's stock
was trading on the open market for $21 per share at the...
On January 2, 2018, All Good Company purchased 5,000 shares of the stock of Big Bad...
On January 2, 2018, All Good Company purchased 5,000 shares of
the stock of Big Bad Company, and DID obtain significant influence.
The investment is intended as a long-term investment. The stock was
purchased for $17 per share, and represents a 30% ownership stake.
Big Bad Company made $400,000 of net income in 2018, and paid
dividends to All Good Company of $40,000 on December 15, 2018. Big
Bad Company's stock was trading on the open market for $17 per...
On January 2, 2019, All Good Company purchased 11,000 shares of the stock of Big Bad...
On January 2, 2019, All Good Company purchased 11,000 shares of
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influence. The investment is intended as a long-term
investment. The stock was purchased for $16 per share, and
represents a 10% ownership stake. Big Bad Company made $400,000 of
net income in 2019, and paid dividends to All Good Company of
$5,000 on December 15, 2019. On December 31, 2019, Big
Bad Company's stock was trading on the open market...
On January 2, 2019, All Good Company purchased 12,000 shares of the stock of Big Bad Company, and DID NOT obtain significant influence.
On January 2, 2019, All Good Company purchased 12,000
shares of the stock of Big Bad Company, and DID NOT obtain
significant influence. The investment is intended as a
long-term investment. The stock was purchased for $13
per share, and represents a 10% ownership stake. Big Bad Company
made $300,000 of net income in 2019, and paid dividends to All Good
Company of $10,000 on December 15, 2019. On December 31,
2019, Big Bad Company's stock was trading on the open market for...
On January 2, 2018, Baltimore Company purchased 7,000 shares of the stock of Towson Company at...
On January 2, 2018, Baltimore Company purchased 7,000 shares of
the stock of Towson Company at $13 per share. Baltimore did NOT
obtain significant influence as the purchase represents a 10%
ownership stake in Towson Company. On August 1, 2018, Towson
Company paid cash dividends of $25,000. Baltimore Company intended
this investment to a long-term investment. On December 31, 2018,
Towson Company reported $60,000 of net income for FY 2018.
Additionally, the current market price for Towson Company's stock
increased...
On January 2, 2018, Baltimore Company purchased 9,000 shares of the stock of Towson Company at...
On January 2, 2018, Baltimore Company purchased 9,000 shares of
the stock of Towson Company at $14 per share. Baltimore did NOT
obtain significant influence as the purchase represents a 5%
ownership stake in Towson Company. On August 1, 2018, Towson
Company paid cash dividends of $15,000. Baltimore Company intended
this investment to a long-term investment. On December 31, 2018,
Towson Company reported $80,000 of net income for FY 2018.
Additionally, the current market price for Towson Company's stock
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On January 2, 2018, Baltimore Company purchased 9,000 shares of the stock of Towson Company at...
On January 2, 2018, Baltimore Company purchased 9,000
shares of the stock of Towson Company at $14 per share. Baltimore
did NOT obtain significant influence as the purchase represents a
5% ownership stake in Towson Company. On August 1, 2018, Towson
Company paid cash dividends of $21,000. Baltimore Company intended
this investment to a long-term investment. On December 31, 2018,
Towson Company reported $65,000 of net income for FY 2018.
Additionally, the current market price for Towson Company's stock
increased...
On January 2, 2018, Baltimore Company purchased 20,000 shares of the stock of Towson Company at...
On January 2, 2018, Baltimore Company purchased 20,000 shares of
the stock of Towson Company at $12 per share. Baltimore obtained
significant influence as the purchase represents a 40% ownership
stake in Towson Company. On August 1, 2018, Towson Company paid
cash dividends of $15,000. Baltimore Company intended this
investment to a long-term investment. On December 31, 2018, Towson
Company reported $50,000 of net income for FY 2018. Additionally,
the current market price for Towson Company's stock increased to
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On January 2, 2018, Baltimore Company purchased 18,000 shares of the stock of Towson Company at...
On January 2, 2018, Baltimore Company purchased 18,000 shares of
the stock of Towson Company at $10 per share. Baltimore obtained
significant influence as the purchase represents a 40% ownership
stake in Towson Company. On August 1, 2018, Towson Company paid
cash dividends of $19,000. Baltimore Company intended this
investment to a long-term investment. On December 31, 2018, Towson
Company reported $50,000 of net income for FY 2018. Additionally,
the current market price for Towson Company's stock increased to
$26...
On January 2, 2018, Baltimore Company purchased 9,000 shares of the stock of Towson Company at...
On January 2, 2018, Baltimore Company purchased 9,000
shares of the stock of Towson Company at $13 per share. Baltimore
did NOT obtain significant influence as the purchase represents a
15% ownership stake in Towson Company. On August 1, 2018, Towson
Company paid cash dividends of $19,000. Baltimore Company intended
this investment to a long-term investment. On December 31, 2018,
Towson Company reported $60,000 of net income for FY 2018.
Additionally, the current market price for Towson Company's stock
increased...
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