Question

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 to $18 per share at the end of the year. Use this information to determine, how much Baltimore Company should report for its investment in Towson Company on December 31, 2018. (Round to the nearest dollar.) Your Answer:

Frederick Company has two service departments (Cafeteria Services & Maintenance). Frederick has two production departments (Assembly Department & Packaging Department.) Frederick uses a step allocation method where Cafeteria Services is allocated to all departments and Maintenance Services is allocated to the production departments. All allocations are based on total employees. Cafeteria Services has costs of $165,000 and Maintenance has costs of $170,000 before any allocations. What amount of Maintenance total cost is allocated to the Packaging Department? (round to closest whole dollar) Employees are:

            Cafeteria Services 3

            Maintenance    6

Assembly Department 9

Packaging Department 10

Your Answer:

Answer 1

ANSWER

Current market price for Towson Company's stock = $18 per share at the end of the year

Number of shares bought = 9,000

Fair value of Towson Company's stock at the end of the year = 9,000 x 18

= $162,000

Baltimore Company should report for its investment in Towson Company on December 31, 2018 = $162,000

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As per the details given in the question cafeteria cost is allocated to all department but maintenance cost is allocated to production department only on the basis of no. of employees.

Total Maintenance cost is $170,000 before allocation.

Total employees of in Production Department is 19 ( 9 Assembly + 10 Packaging )

Total maintenance cost per employee = $170,000  / 19

                                                        =$8,947

Total allocation of maintenance cost of packaging department ids $ 8,947 X 10 employees i.e. $89,470.

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