Penston Company owns 40 percent (40,000 shares) of Scranton, Inc., which it purchased several years ago for
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Excess patent cost amortization of $12,000 is still being recognized each year. During 2013, Scranton reports net income of $200,000; $320,000 in operating income earned evenly throughout the year, and a $120,000 extraordinary loss incurred on October 1. No dividends were paid during the year. Penston sold 8,000 shares of Scranton on August 1, 2013, for $94,000 in cash.
However, Penston retains the ability to significantly influence the investee.
During the last quarter of 2012, Penston sold $50,000 in inventory (which it had originally purchased for only $30,000) to Scranton. At the end of that fiscal year, Scranton's inventory retained $9,000 (at sales price) of this merchandise, which was subsequently sold in the first quarter of 2013.
On Penston's financial statements for the year ended December 31, 2013, what income effects would be reported from its ownership in Scranton?
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...
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Related Book For
Fundamentals of Advanced Accounting
ISBN: 978-0077667061
5th edition
Authors: Joe Ben Hoyle, Thomas Schaefer, Timothy Doupnik
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