Gant Company purchased 20 percent of the outstanding shares of Temp Company for
ID: 2328946 • Letter: G
Question
Gant Company purchased 20 percent of the outstanding shares of Temp Company for $87000 on January 1, 20X6. The following results are reported for lemp Company: 20X7 47,000 42,000 63,000 27,000 20x6 12,000 87,000 20X8 Net income Dividends paid Fair value of shares held by Gant: 17,000 January 1 December 31 106,000 103,000 103,000 114,000 106,000 Required: Determine the amounts reported by Gant as income from its investment in Temp for each year and the balance in Gant's investment in Temp at the end of each year assuming that Gant uses the following options in accounting for its investment in Temp a. Carries the investment at fair value b. Uses the equity method Complete this question by entering your answers in the tabs below Required ARequired B Determine the amounts reported by Gant as income from its investment in Temp for each year and the balance in Gant's investment in Temp at the end of each year assuming that Gant uses the fair value option in accounting for its investment in TempExplanation / Answer
solution :-
a). Investment of Fair value method :-
= 12,000 * 20%
= $2400
=27,000 * 20%
= $ 5,400
= 17 ,000 * 20%
= $3,400
= (87,000 - 1,06,000)
= $ 19,000
= (1,03,000 - 1,06,000)
= $ 3,000
= ( 1,14,000 - 1,03,000)
= $ 11,000
= (19,000 + 2,400)
= $ 21,400
= ( 3000 + 5400)
= $ 8,400
= ( 11,000 + 3,400)
=$14,400
b).Equity method :-
= 47,000 * 20%
= 47,000 * 0.20
= $ 9,400
= 42,000 * 20%
= 42,000 * 0.20
= $8,400
63,000 * 20%
= 63,000 * 0.20
= $12,600
= (12,000 * 20%)
= $2400
=(27,000 * 20%)
= $ 5,400
= (17 ,000 * 20%)
= $3,400
=( 87,000 + 9,400-2,400)
= $94,000
= (1,06,000+ 8,400 - 5,400)
= $ 1,09,000
= (1,03,000 + 12,600 - 3,400)
= $1,12,000
20X6 20X7 20X8 Income from investment: Paid Dividend= 12,000 * 20%
= $2400
=27,000 * 20%
= $ 5,400
= 17 ,000 * 20%
= $3,400
Change in fair value = (amount of december 31 - amount of january 1)= (87,000 - 1,06,000)
= $ 19,000
= (1,03,000 - 1,06,000)
= $ 3,000
= ( 1,14,000 - 1,03,000)
= $ 11,000
Total income investment = paid dividend + change in fair value= (19,000 + 2,400)
= $ 21,400
= ( 3000 + 5400)
= $ 8,400
= ( 11,000 + 3,400)
=$14,400
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