40. How much would be reported as 2022 income (total) before taxes related to Pastorini? How...

Transcribed Image Text:

40. How much would be reported as 2022 income (total) before taxes related to Pastorini? How much would be reported as 2023 income (total) before taxes related to Pastorini? Vicki Thropp decided it was time to take advantage of the recent market upturn and invest the company's excess cash. Rather than diversify, she chose to allocate the company's available funds across two companies: Pastorini and Stabler. Both of the companies paid dividends once each year, in December. All of her orders were placed and executed during 2022. Her intent was to hold each investment long-term. She reported her investment in Stabler as "trading" per U.S. GAAP, and Pastorini using the equity method of accounting. Throughout 2022 Vicki had only casually monitored her investment performance. In mid-2023, however, Vicki did liquidate the entire position in Stabler at $30 per share. In her preparation of the 2022 and 2023 financial statements over the course of two years, Vicki gathered the following data pertaining to each of the company's investments: Acquisition date Purchase amount Shares purchased Purchase price per share % control acquired Presumed influence 2022 Company Data* Net income (loss) Dividends (total company) Price per share (12/31/22) 2023 Company Data* Net income (loss) S Dividends (total company) Price per share (12/31/23) Pastorini 1/1/2022 $4,250,000 250,000 $17 40% significant $500,000 $150,000 $11 (200,000) $80,000 $21 Stabler 9/1/2022 $375,000 15,000 $25 3% passive $800,000 $100,000 $21 n/a - sold n/a - sold n/a - sold 40. How much would be reported as 2022 income (total) before taxes related to Pastorini? How much would be reported as 2023 income (total) before taxes related to Pastorini? Vicki Thropp decided it was time to take advantage of the recent market upturn and invest the company's excess cash. Rather than diversify, she chose to allocate the company's available funds across two companies: Pastorini and Stabler. Both of the companies paid dividends once each year, in December. All of her orders were placed and executed during 2022. Her intent was to hold each investment long-term. She reported her investment in Stabler as "trading" per U.S. GAAP, and Pastorini using the equity method of accounting. Throughout 2022 Vicki had only casually monitored her investment performance. In mid-2023, however, Vicki did liquidate the entire position in Stabler at $30 per share. In her preparation of the 2022 and 2023 financial statements over the course of two years, Vicki gathered the following data pertaining to each of the company's investments: Acquisition date Purchase amount Shares purchased Purchase price per share % control acquired Presumed influence 2022 Company Data* Net income (loss) Dividends (total company) Price per share (12/31/22) 2023 Company Data* Net income (loss) S Dividends (total company) Price per share (12/31/23) Pastorini 1/1/2022 $4,250,000 250,000 $17 40% significant $500,000 $150,000 $11 (200,000) $80,000 $21 Stabler 9/1/2022 $375,000 15,000 $25 3% passive $800,000 $100,000 $21 n/a - sold n/a - sold n/a - sold

Answer rating: 100% (QA)

To calculate the income reported before taxes related to Pastorini for 2022 and 2023 we need to cons... View the full answer