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# On January 1, 2011, Acme Co. is considering purchasing a 40 percent ownership interest in PHC Co., a privately held enterprise, for \$700,000. PHC...

This is a continuation of a problem. The first section was answered by a tutor on Course Hero, the spreadsheet solution is attached. Can you please help with the second portion?

2. Referring to the values in (1), prepare the following schedules using columns for the years 2011
through 2015.
• Acme’s equity in PHC earnings with rows showing these:
• Acme’s share of PHC reported income.
• Amortization expense.
• Acme’s equity in PHC earnings.
• Acme’s Investment in PHC balance with rows showing the following:
• Beginning balance.
• Equity earnings.
• Dividends.
• Ending balance.
• Return on beginning investment balance _ Equity earnings/Beginning investment balance in each
year." "

On January 1, 2011, Acme Co. is considering purchasing a 40 percent ownership interest in PHC Co., a privately held enterprise, for \$700,000. PHC predicts its profit will be \$185,000 in 2011, projects a 10 percent annual increase in profits in each of the next four years, and expects to pay a steady annual dividend of \$30,000 for the foreseeable future. Because PHC has on its books a patent that is undervalued by \$375,000, Acme realizes that it will have an additional amortization expense of \$15,000 per year over the next 10 years—the patent’s estimated useful life. All of PHC’s other assets and liabilities have book values that approximate market values. Acme uses the equity method for its investment in PHC. Required 1. Using an Excel spreadsheet, set the following values in cells: • Acme’s cost of investment in PHC. • Percentage acquired. • First-year PHC reported income. • Projected growth rate in income. • PHC annual dividends. • Annual excess patent amortization. ============================ Solution: Cost of investment in PHC 700000 Percentage acquired 40% First-year PHC reported income 185000 Projected growth rate in income 10% PHC annual dividends 30000 Annual excess patent amortization 15000%

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