Opt_Prob_Solutions_chap_12_Solutions

Opt_Prob_Solutions_chap_12_Solutions - E127. Req. 1 The...

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E12–7. Req. 1 The equity method must be used because the company owns 35% (21,000 ÷ 60,000) of the total shares outstanding of Nueces Corporation. The equity method must be used when there is at least 20% but not more than 50% ownership in existence. The Felicia Company must use the equity method because it can exercise significant influence, but not control, over the operating and financing policies of Nueces Corporation. Req. 2 January 10, 2008: Investment in associated companies (+A). ............................ 252,000 Cash (–A). ........................................................................... 252,000 Purchased 21,000 shares (35%) of the common stock of Nueces Corp. at $12 per share. December 31, 2008: Investment in associated companies (+A). ............................ 31,500 Equity in earnings of associated companies (+R, +SE). .... 31,500 To record 35% of the revenue reported by Nueces Corp. ($90,000 x 35% = $31,500) December 31, 2008: Cash (+A). .............................................................................. 12,600 Investment in associated companies (–A). ......................... 12,600 To record 35% of cash dividends paid by Nueces Corp. (21,000 shares x $.60 = $12,600)
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This homework help was uploaded on 02/19/2009 for the course HA 230 taught by Professor Davidlee during the Fall '06 term at Cornell University (Engineering School).

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Opt_Prob_Solutions_chap_12_Solutions - E127. Req. 1 The...

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