in

How much difference would there have been in Franel’s income with regard to the effect of the investment, between using the equity method or using the partial e

A) $170,000.

B) $354,000.

C) $164,000.

D) $    6,000.

E) $174,000.

Answer: D         

Learning Objective: 03-02 

Learning Objective: 03-03a 

Learning Objective: 03-03c

Topic: Investment methods―Identify and differentiate

Topic: Investment and income―Equity method

Topic: Investment and income―Partial equity method

Difficulty: 1 Easy

Blooms: Apply

AACSB: Knowledge Application

AICPA BB: Critical Thinking

AICPA FN: Measurement

Feedback: Equity Method = $360,000 – $6,000  = $354,000 Equity income

Partial Equity Method = $360,000 – $0 (amortizations not recorded under partial equity method); $354,000 – $360,000 = $6,000 difference

REFERENCE: 03-03

Cashen Co. paid $2,400,000 to acquire all of the common stock of Janex Corp. on January 1, 2017.  Janex’s reported earnings for 2017 totaled $432,000, and it paid $120,000 in dividends during the year.  The amortization of allocations related to the investment was $24,000.  Cashen’s net income, not including the investment, was $3,180,000, and it paid dividends of $900,000.

What do you think?

Written by Homework Lance

Leave a Reply

Your email address will not be published. Required fields are marked *

GIPHY App Key not set. Please check settings

Consolidations – Subsequent to the Date of Acquisition

On the consolidated financial statements for 2017, what amount should have been shown for Equity in Subsidiary Earnings?