King Inc, together with a 3 rd party investor, have created a crypto mining company whereby King
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Question:
King Inc, together with a 3rd party investor, have created a crypto mining company whereby King Inc owns 65% of the entity. King Inc pays the 3rd party a fixed fee of 5% of all BTC mined and in return is entitled to 65% of all remaining profits. Assume the following:
- On January 1, 2020 King Inc contributed 700 BTC and the 3rd party contributed 300 BTC
- During 2020 approximately 500 BTC was mined by the company.
- The average price of BTC was $12,000 / 1 BTC during the year (assume BTC was mined evenly throughout the period)
- Electricity and other costs for the full year amounted to $750,000
- The closing price of BTC as of 12/31/2020 was $30,000 /1 BTC
Given the background above calculate and list the journal entries for the following:
- What was the fully year earnings of the company?
- As of December 31, 2020 what was King Inc's interest in the company worth?
- What was the rate of return for King Inc's investment?
Related Book For
Financial and Managerial Accounting
ISBN: 978-0132497978
3rd Edition
Authors: Horngren, Harrison, Oliver
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