Marketing - Ch13&App. D handout Appendix D Reporting and...

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Ch13&App. D handout Appendix D Reporting and Analyzing Investments I. Equity method vs. Cost method Assume Company P acquired 40% of the stocks of Company A for $1.5 million on 1/1/2010. During the year, Company A has $500,000 in Net income and paid dividends of $125,000. 1) At the end of 2010, what will Company P report on Balance sheet as investment in Company A? Equity method 1.5 mil +40% * 500,000 -40%*125,000 =1.65 mil 2) What will Company P report on Income statement related to investment in A? =150,000 3) Assume Company P acquired 10% instead of 40% of Company A on 1/1/2010. What will P record on Balance sheet and Income statement? B/S: ____________ I/S: _____________________ Cost method 125,000*2%=2500 II. Trading vs. Available for sale securities exercise: 1. E.g. Assume Company P buys 1,000 shares of Company A for $80 per share. The stock price at year-end is $75. 1) At year-end, what will Company P record on the balance sheet? a)
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This note was uploaded on 02/24/2011 for the course BUS 310 taught by Professor Markbambach during the Fall '10 term at University of Delaware.

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Marketing - Ch13&App. D handout Appendix D Reporting and...

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