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In: Accounting
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 loss on the sale?
2. How much unrealized gain or loss is carried forward to 2024?
3. What is the "income to the NC Interest" in 2023?
4. In 2026 the patent is sold to some third party. In the elimination entries related to this intercompany sale, what account ["Gain on sale", "Retained earnings", "Non-controlling interest", "Investment in Little", "Investment income"] would be credited, for what amount ["1,000", "2,000", "3,000", "4,000"] ?
Solutions
ekkarill92 answered 1 year 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 80% of the stock of Little Co. On 1/1/23 Little issues $100,000 of...
Big Co. owns 80% of the stock of Little Co. On 1/1/23 Little
issues $100,000 of 10%, 10 year bonds directly to Big for
$103,000. Big and Little both use
straight-line amortization.
Prepare elimination entries RELATING TO THIS INTERCOMPANY
TRANSACTION for 2023 and 2024
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...
Assume that Big Company owns 40% of the stock of Little. Big is the largest shareholder...
Assume that Big Company owns 40% of the stock of Little. Big is
the largest shareholder of Little. Little is not a publicly traded
company, and there is no easy way to know the fair value of its
stock. Explain why using the equity method of accounting for this
investment provides financial statement users with better
information than the cost method would. I am looking for two or
more ways in which the equity method gives information that better
reflects...
On 1/1/22 Big Co. acquires 40% of Little Co's voting stock for $300,000. Little Co's book...
On 1/1/22 Big Co. acquires 40% of Little Co's voting stock for
$300,000. Little Co's book value on that date was $500,000. Little
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.
During 2022, Little reports earnings of $50,000 and pays dividends
of $10,000 During 2023, Little reports earnings of $60,000 and pays
no...
Big Co. purchases shares of Little Co starting on 1/1/21. Little Co. has 100,000 shares of...
Big Co. purchases shares of Little Co starting on 1/1/21. Little
Co. has 100,000 shares of stock outstanding. Relevant data shown
below:
1/1/21: Purchased 5,000 shares at $18/share, plus $10
commission.
11/1/21: Little Co. paid common dividends totaling $10,000
12/31/21: Little Co. stock trading at $20/share
4/1/22: Purchased 6,000 shares at $21/share, plus $10
commission
11/1/22: Little Co. paid dividends totaling $10,000
12/31/22: Little Co stock trading at $19/share
3/1/23: Sold 1,000 shares of Little Co stock at $19.50/share,
less...
Big Co. purchases shares of Little Co starting on 1/1/21. Little Co. has 100,000 shares of...
Big Co. purchases shares of Little Co starting on 1/1/21. Little
Co. has 100,000 shares of stock outstanding. Relevant data shown
below:
1/1/21: Purchased 5,000 shares at $18/share, plus $10
commission.
11/1/21: Little Co. paid common dividends totaling $10,000
12/31/21: Little Co. stock trading at $20/share
4/1/22: Purchased 6,000 shares at $21/share, plus $10
commission
11/1/22: Little Co. paid dividends totaling $10,000
12/31/22: Little Co stock trading at $19/share
3/1/23: Sold 1,000 shares of Little Co stock at $19.50/share, less...
Big Red Computer Sales sold to Little Red Insurance Co. The following package. Initial software package...
Big Red Computer Sales sold to Little Red Insurance Co. The
following package.
Initial software package
for 100,000
Training
300,000
Updates
50,000
Terms of the sale include initial down payment of 200,000 on
date of sale of 1/1/04 and balance due 1/1/05. Software package is
to be delivered and installed when down payment is made. Training
is to incur over first two years and update to occur at end of
first year. Prepare journal entries.
Push Company owns 60% of Shove Company's outstanding common stock. Intra-entity sales are as follows: Year...
Push Company owns 60% of Shove Company's outstanding common
stock. Intra-entity sales are as follows:
Year
Inventory
Cost
Transfer
Price
Inventory Remaining
at Year
End
(at transfer
price)
20X1
$80,000
$100,000
$30,000
20X2
$110,000
$130,000
$26,00
Assume Push sold the inventory to Shove. Using the fully
adjusted equity method, what journal entry would be recorded by
Push to defer the unrealized gross profit on inventory sales to
Shove in 20X1?
A.
Income from Shove Company
6,000
Investment in Shove...
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