Question

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

Expert Solution

ekkarill92 answered 1 year ago
Next > < Previous

Related 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. Flag this Question 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 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...
King Corp. owns 59% of Lee Corp's common stock. During October, Lee sold merchandise to King...
King Corp. owns 59% of Lee Corp's common stock. During October, Lee sold merchandise to King for $100,000. At December 31, one-half of the merchandise remained in King's inventory. For the year, gross profit as a percentage of sales was 48% for King and 47% for Lee. Calculate the elimination adjustment to net income available to controlling interest for the year the intercompany sale occurred. Use a negative sign to indicate a decrease; no sign to indicate an increase.
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT