The Greenpath Corporation\'s (Greenpath) balance sheet shows assets of $800,000

Question

The Greenpath Corporation's (Greenpath) balance sheet shows assets of $800,000 and liabilities of $300,000. In addition, the company has an unrecorded intangible asset with a value of $100,000 and a 10-year useful life. On January 1, 20X1, the Montana Corporation acquires 30% of Greenpath's outstanding stock for $290,000. In 20X1, Greenpath reported net income of $90,000 and paid dividends of $20,000. In 20X2, Greenpath reported net income of $110,000 and paid dividends of $50,000. If the equity method is being applied to this investment, what is the reported balance for the investment account at the end of 20X2?

a. $311,000

b.$302,000

c.$323,000

d.$317,500

Explanation / Answer

Answer: c. $323,000

=>If the equity method is being applied to this investment, the reported balance for the investment account at the end of 20X2 =

Purchase = $290,000

+ Income 30% of $90000 for 20X1 = $27000

- Dividend 30% of $20000 for 20X1= - $6000

-Amortization-intangible assets-20X1 = - $3000 (Calculation= 100000*30%/10=$3000)

+ Income 30% of $110000 for 20X2 = $33000

- Dividend 30% of $50000 for 20X2= - $15000

-Amortization-intangible assets-20X1 = - $3000

Reported Balance for Investment a/c = $323,000

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.