Exercise 121 (a) Fair Value Mcthod (b) Equity Method Dividend Revenue Investment
ID: 2538338 • Letter: E
Question
Exercise 121
(a) Fair Value Mcthod (b) Equity Method Dividend Revenue Investment Investment Investment 1" At the beginning of Year 1, Crane bought 25% of Hudson's common stock at its book value. Total book value of all Hudson's common stock was $310,000 on this date 2. During Year 1, Hudson reported $56,000 of net income and paid $28,000 of dividends 3. During Year 2, Hudson reported $29,500 of net income and paid $20,000 of dividends. 4. During Year 3, Hudson reported a net loss of s9,000 and paid $4,000 of dividends. 2250 -1 Indicate the Year 3 ending balance in the Investment account, and cumulative totals for Years 1, 2, and 3 202500 11625 207625 18125 for dividend revenue and investment revenue Click if you would like to Show Work for this question: Open Show WorkExplanation / Answer
Answer
Transaction
Fair Value Method
Equity Method
Investment Account
Dividend Revenue
Investment Account
Investment Revenue
1
202,500
-
202,500
-
2
-
-
14,000
(56,000 * 25%)
14,000
(56,000 * 25%)
-
7,000
(28,000 * 25%)
(7,000)
(28,000 * 25%)
-
3
-
-
7,375
(29,500 * 25%)
7,375
(29,500 * 25%)
-
5,000
(20,000 * 25%)
(5,000)
(20,000 * 25%)
-
4
-
-
(2,250)
(-9,000 * 25%)
(2,250)
(-9,000 * 25%)
-
1,000
(4,000 * 25%)
(1,000)
(4,000 * 25%)
-
5
202,500
13,000
208,625
19,125
Note
Transaction
Fair Value Method
Equity Method
Investment Account
Dividend Revenue
Investment Account
Investment Revenue
1
202,500
-
202,500
-
2
-
-
14,000
(56,000 * 25%)
14,000
(56,000 * 25%)
-
7,000
(28,000 * 25%)
(7,000)
(28,000 * 25%)
-
3
-
-
7,375
(29,500 * 25%)
7,375
(29,500 * 25%)
-
5,000
(20,000 * 25%)
(5,000)
(20,000 * 25%)
-
4
-
-
(2,250)
(-9,000 * 25%)
(2,250)
(-9,000 * 25%)
-
1,000
(4,000 * 25%)
(1,000)
(4,000 * 25%)
-
5
202,500
13,000
208,625
19,125
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