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Chap002_Classproblems_solu

Chap002_Classproblems_solu - Proportionate share of...

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Solutions to Chapter 2 In-class Problems E2-16 Differential Assigned to Land and Equipment Journal entries recorded by Rod Corporation: (1) Investment in Stafford Corporation Stock 65,000 Cash 65,000 Record purchase of Stafford Stock. (2) Cash 4,500 Investment in Stafford Corporation Stock 4,500 Record dividend from Stafford: $15,000 x .30 (3) Investment in Stafford Corporation Stock 12,000 Income from Stafford 12,000 Record equity-method income: $40,000 x .30 (4) Income from Stafford 1,000 Investment in Stafford Corporation Stock 1,000 Amortize differential assigned to equipment.
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Solutions to Chapter 2 In-class Problems P2-32 Complex Differential a. Essex Company 20X2 equity-method income:
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Unformatted text preview: Proportionate share of reported net income ($80,000 x .30) $24,000 Deduct increase in cost of goods sold for purchase differential assigned to inventory ($30,000 x .30) (9,000) Deduct amortization of purchase differential assigned to: Buildings and equipment [($320,000 - $260,000) x .30] / 12 years] (1,500) Patent [($25,000 x .30) / 10 years] (750 ) Equity-method income for 20X2 $12,750 b. Computation of investment account balance on December 31, 20X2: Purchase Price $165,000 Investment income for 20X2 $12,750 Dividends received in 20X2 ($9,000 x .30) (2,700 ) 10,050 Investment account balance on December 31, 20X2 $175,050...
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