Question
In: Accounting
Big Co. owns 60% of the stock of Little Co. On 1/1/22, Little Co sells land...
Big Co. owns 60% of the stock of Little Co.
On 1/1/22, Little Co sells land to Big Co for $50,000. The land had cost Little Co. $30,000 several years earlier.
On 3/1/25, Big Co sells the land to a thirds party for $80,000
Little Co reports earnings of $50,000 each year.
What is the unrealized gain on sale in 2022?
What is the income to the NC Interest in 2022 and 2023?
What is the income to the NC Interest in 2025?
Solutions
Expert Solution
| Transactions of Little Co | Profit Portion | |||||
| Big | NC Interest | |||||
| Date and Year | Particulars | Sale Value | Cost | Profit | 60% | 40% |
| Year 2022 | ||||||
| 1/1/22 | Sale of Land | 50,000 | 30,000 | 20,000 | 12,000 | 8,000 |
| Year 2022 | Earnings | - | - | 50,000 | 30,000 | 20,000 |
| Total | 70,000 | 42,000 | 28,000 | |||
| Year 2023 | ||||||
| Year 2023 | Earnings | - | - | 50,000 | 30,000 | 20,000 |
| Total | 50,000 | 30,000 | 20,000 | |||
| Year 2024 | ||||||
| Year 2024 | Earnings | - | - | 50,000 | 30,000 | 20,000 |
| Total | 50,000 | 30,000 | 20,000 | |||
| Year 2025 | ||||||
| Year 2025 | Earnings | - | - | 50,000 | 30,000 | 20,000 |
| Total | 50,000 | 30,000 | 20,000 | |||
| What is the unrealized gain on sale in 2022 | ||||||
| Gain to Big | Gain to NC Interest | |||||
| AS per Above Working: | Total Gain | 20,000 | 12,000 | 8,000 | ||
| What is the income to the NC Interest in 2022 and 2023 | ||||||
| Year 2022 | Unrealised Gain | 8,000 | ||||
| Earning | 20,000 | |||||
| Year 2022 | 28,000 | |||||
| Year 2023 | Earning | 20,000 | ||||
| Year 2023 | 20,000 | |||||
| What is the income to the NC Interest in 2025 | ||||||
| Year 2025 | Earning | 20,000 | ||||
| Year 2025 | 20,000 |
ekkarill92 answered 2 years agoRelated Solutions
Big Co. owns 60% of Little Co common stock. On 1/1/23 Big Co sold a patent...
Big Co. owns 60% of Little Co common stock. On 1/1/23 Big Co
sold a patent to Little Co for $32,000. The patent had a book value
of $20,000 on that date, with a 4 year remaining useful life.
On 5/1/26 Little sells the patent to a third party for
$20,000.
Little Co reports earnings of $50,000 each year.
Big uses the FULL equity method to account for their investment
in Little.
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Question 11 pts
How much...
Big Co. owns 60% of Little Co common stock. On 1/1/23 Big Co sold a patent...
Big Co. owns 60% of Little Co common stock. On 1/1/23 Big Co
sold a patent to Little Co for $32,000. The patent had a book value
of $20,000 on that date, with a 4 year remaining useful life.
On 5/1/26 Little sells the patent to a third party for $20,000.
Little Co reports earnings of $50,000 each year.
Big uses the FULL equity method to account for their investment
in Little.
1. How much was the unrealized gain or...
Big Co. owns 60% of Little Co common stock. On 1/1/23 Big Co sold a patent...
Big Co. owns 60% of Little Co common stock. On 1/1/23 Big Co
sold a patent to Little Co for $32,000. The patent had a book value
of $20,000 on that date, with a 4 year remaining useful life.
On 5/1/26 Little sells the patent to a third party for $20,000.
Little Co reports earnings of $50,000 each year.
Big uses the FULL equity method to account for their investment
in Little.
1. How much was the unrealized gain or...
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On 1/1/22 Big Co. acquires 40% of Little Co's voting stock for
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Co. had the following mis-valued assets at 1/1/22: Land:
Undervalued by $40,000 (total) Inventory, FIFO basis: Undervalued
by $20,000 (total) Equipment, 5 year life: undervalued by $30,000
(total) Any remaining differential is attributed to goodwill.
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Big Co. purchases shares of Little Co starting on 1/1/21. Little
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below:
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11/1/22: Little Co. paid dividends totaling $10,000
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commission
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