The Coca-Cola Company owns 40 percent of the voting stock of Coca-Cola FEMSA, acquired at book...

The Coca-Cola Company owns 40 percent of the voting stock of Coca-Cola FEMSA, acquired at book value. Assume that Coca-Cola FEMSA reports income of $6 million for 2013. Coca-Cola FEMSA regularly sells canned beverages to Coca-Cola at a markup of 42 percent on cost. During 2013 Coca-Cola FEMSA's sales to Coca-Cola totaled $30 million. Coca-Cola's January 1, 2013, inventories include $1,620,000 purchased from Coca-Cola FEMSA. Coca-Cola's December 31, 2013, inventories include $1,458,000 purchased from Coca-Cola FEMSA. Prepare the 2013 journal entry on Coca-Cola's books to recognize its income from Coca-Cola FEMSA under the equity method.

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Expert Solution

As Coca-Cola company owns 40% of the voting stock in Coca-Cola FEMSA therefore Coca Cola FEMSA will be treated as it's associate.

Under the Equity method for consolidating the results of Investee Company or Associate Investment is initiallyrecorded at cost. Subsequently carruying amount is increased on the basis of sshare of profits or decreased on the basis of share of loss in associate.

ekkarill92 answered 1 year ago

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