I On January 4, 2007, Harley, Inc. acquired 40% of the outstanding common stock
ID: 340676 • Letter: I
Question
I
On January 4, 2007, Harley, Inc. acquired 40% of the outstanding common stock of Bike Co. for $2,400,000. This investment gave Harley the ability to exercise significant influence over Bike. Bike's assets on that date were recorded at $10,500,000 with liabilities of $4,500,000. There were no other differences between book and fair values. During 2007, Bike reported net income of $500,000. For 2008, Bike reported net incomo of $800,000. Dividends of $300,000 were paid in each of these two years. 11. How much income did Harley report from Bike for 2007? A. S120,000 B. $200,000 C. $300,000 D. $320,000 E $500,000 12. How much income did Harley report from Bike for 2008? A.$120,000 B. $200,000 C. $300,000 D. $320,000 E. $500,000 13. What was the reported balance of Harley's Investment in Bike Co. at December 31, 2007? A. $880,000 B. $2,400,000 C. $2,480,000 D. $2,600,000 E. $2,900,000 14. What was the reported balance of Harley's Investment in Bike Co.at December 31, 20087 A. $2,400,000 B. $2,480,000 C$2,500,000 D. $2,600,000 E. $2,680,000Explanation / Answer
Answer to question 11:
Income to be reported by HARLEY for 2007: $ 500,000 X 40% = $ 200,000 ( B)
Answer to question 12:
Income to be reported by HARLEY for 2008: $ 800,000 X 40% = $ 320,000 ( D)
Answer to question 13:
Reprted Balance of invetment in 2007: $ 2,400,000 + $ 200,000 - $ 120,000 = $ 2,480,000 ( C)
Answer to question 14:
Reprted Balance of invetment in 2008: $ 2,480,000 + $ 320,000 - $ 120,000 = $ 2,680,000 ( D)
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