On January 1, 2013, Lion Company paid $600,000 for 10,000 shares of Wolf Company's voting common stock, which was a 10% interest in Wolf. Lion does not have the ability to exercise significant influence over the operating and financial policies of Wolf. Lion received dividends of $1.00 per share from Wolf on October 2, 2013. Wolf reported net income of

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On January 1, 2013, Lion Company paid $600,000 for 10,000 shares of Wolf Company's voting common stock, which was a 10% interest in Wolf. Lion does not have the ability to exercise significant influence over the operating and financial policies of Wolf. Lion received dividends of $1.00 per share from Wolf on October 2, 2013. Wolf reported net income of $400,000 for the year ended December 31, 2013, and the ending market price of its shares was $63.

On July 2, 2014, Lion paid $1,950,000 for 30,000 additional shares of Wolf's voting common stock, which represents a 30% investment in Wolf. The fair values of all of Wolf's assets, net of liabilities, were equal to their book values of $6,500,000. As a result of this transaction, Lion has the ability to exercise significant influence over the operating and financial policies of Wolf. Lion received dividends of $1.00 per share from Wolf on April 2, 2014, and $1.35 per share on October 1, 2014. Wolf reported net income of $500,000 for the year ended December 31, 2014, and $200,000 for the 6 months ended December 31, 2014.

Required:

1. For Lion, show the dividend income for 2013, as well as the December 31, 2013, unrealized holding gain or loss for the available-for-sale securities and carrying value of the investment account.

2. Assuming that Lion issues comparative financial statements for 2013 and 2014, show the investment income for 2013 and 2014, as well as the December 31, 2013 and 2014 carrying value of the investment account.

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
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...
Related Book For answer-question

Intermediate Accounting Reporting and Analysis

1st edition

Authors: James M. Wahlen, Jefferson P. Jones, Donald Pagach

ISBN: 978-1111822361