Tucker Corporation purchases a 25% interest in Lincoln Company for $120,000 on January 1, 2017. The following
Question:
Lincoln Company earns income of $25,000 in 2017 and $30,000 in 2018. Lincoln Company declares a 25-cent per-share cash dividend on December 22, 2018, payable January 12, 2019, to stockholders of record on December 30, 2018.
During 2018, Lincoln sells merchandise costing $10,000 to Tucker for $15,000. Twenty percent of the merchandise is still in Tuckers ending inventory on December 31; 2018. The fair value of the investment is $135,000 on December 31, 2017, and $145,000 on December 31, 2018.
1. Assuming the use of the equity method, prepare the adjustment on Tuckers books on December 31, 2017, and December 31, 2018, to account for its investment in Lincoln Company. Assume Tucker Corporation makes no adjustment except at the end of each calendar year. Ignore income tax considerations.
2. Assuming the use of the fair value option, prepare the adjustment on Tuckers books on December 31, 2017, and December 31, 2018, to account for its investment in Lincoln Company. Assume Tucker Corporation makes no adjustment except at the end of each calendar year. Ignore income tax considerations.
The ending inventory is the amount of inventory that a business is required to present on its balance sheet. It can be calculated using the ending inventory formula Ending Inventory Formula =... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Distribution
The word "distribution" has several meanings in the financial world, most of them pertaining to the payment of assets from a fund, account, or individual security to an investor or beneficiary. Retirement account distributions are among the most... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
Step by Step Answer:
Advanced Accounting
ISBN: 978-0538480284
11th edition
Authors: Paul M. Fischer, William J. Tayler, Rita H. Cheng