accounting of Investments 5, BOBBY D. COMPANY PURCHASED 38% OF BIG E COMPANY FOR
ID: 2521390 • Letter: A
Question
accounting of Investments
5, BOBBY D. COMPANY PURCHASED 38% OF BIG E COMPANY FOR $1,500,000. THE TOTAL SHARES PURCHASED BY BOBBY D. COMPANY WERE 45,000 SHARES. BIG E COMPANY HAD NET INCOME OF $180,000 FOR THE YEAR. BIG E COMPANY PAID OUT A TOTAL OF $30,000 IN CASH DIVIDENDS. BIG E COMPANY'S STOCK PRICE HAD A FAIR VALUE OF $40 AS OF THE END OF BOBBY D. COMPANY'S YEAR. EXPLAIN HOW BOBBY D. COMPANY REPORTS THIS INFORMATION ON ITS YEAR END BALANCE SHEET AND CURRENT YEAR INCOME STATEMENT, USING THE INFORMATION GIVEN ABOVE ABOUT BIG E COMPANY. BOBBY D. COMPANY HAS DECIDED TO FOLLOW THE GENERAL RULES AND NOT THE OPTIONAL METHOD.Explanation / Answer
Balance sheet of BOBBY D. Particulars $ Investment in BIG E $15,00,000 Share on net income in BIG E $68,400 $15,68,400 Less : Dividend received -$11,400 Closing balance $15,57,000 Income satement of BOBBY D. Particulars $ Share of net income of BIG E. $68,400
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