The following are the financial statements of Michelangelo Corp and VanGogh Inc. prepared on December 31,...

 

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The following are the financial statements of Michelangelo Corp and VanGogh Inc. prepared on December 31, 2020: 2020 INCOME STATEMENTS Van Gogh 270,000 3,600 2. 3. Misc. revenues Interest revenue Dividend revenue 4. Misc. expenses Interest expense Income tax expense Net income Bal, Jan 1 Net income Dividends Bal. Dec 31 Misc. Liabilities Note Payable Misc. Assets Note Receivables Investment in Van Gogh Common Shares Retained Earnings Michelangelo 926,500 10,500 $937,000 736,400 3,600 80,000 $820,000 $117,000 $273,600 229,600 2020 RETAINED EARNINGS STATEMENTS $153,000 117,000 289,800 50,000 $220.000 20,000 249,600 $ 24,000 56,875 $592,000 $212,000 60,000 100,000 220,000 $592,000 BALANCE SHEETS - December 31, 2020 $535,125 $ 72,000 24,000 96,000 15,000 $81.000 $211,000 60,000 Other information: 1. Michelangelo acquired 70% of Van Gogh on January 1, 2019 at a cost of $56,875. On this date VanGogh retained earnings amounted to $10,000, and the acquisition differential was entirely allocated to goodwill. Impairment tests conducted yearly since acquisition yielded a loss of $3,000 in 2019 and a further loss of $2,250 in 2020. Michelangelo uses the cost method to account for the investment. Use the entity theory for calculations. $271,000 $140,000 50,000 81,000 $271,000 The December 31, 2020 inventory of Michelangelo contained purchases made from VanGogh amounting to $10,000. VanGogh sells to Michelangelo at a 40% gross profit. On July 1, 2020 Michelangelo borrowed $60,000 from VanGogh and signed a note bearing interest at 12% per year. Both companies pay income tax at a rate of 40%. REQUIRED: Calculate the balance in the "Investment in VanGogh" account as at December 31, 2020, if Michelangelo had used the equity method. The following are the financial statements of Michelangelo Corp and VanGogh Inc. prepared on December 31, 2020: 2020 INCOME STATEMENTS Van Gogh 270,000 3,600 2. 3. Misc. revenues Interest revenue Dividend revenue 4. Misc. expenses Interest expense Income tax expense Net income Bal, Jan 1 Net income Dividends Bal. Dec 31 Misc. Liabilities Note Payable Misc. Assets Note Receivables Investment in Van Gogh Common Shares Retained Earnings Michelangelo 926,500 10,500 $937,000 736,400 3,600 80,000 $820,000 $117,000 $273,600 229,600 2020 RETAINED EARNINGS STATEMENTS $153,000 117,000 289,800 50,000 $220.000 20,000 249,600 $ 24,000 56,875 $592,000 $212,000 60,000 100,000 220,000 $592,000 BALANCE SHEETS - December 31, 2020 $535,125 $ 72,000 24,000 96,000 15,000 $81.000 $211,000 60,000 Other information: 1. Michelangelo acquired 70% of Van Gogh on January 1, 2019 at a cost of $56,875. On this date VanGogh retained earnings amounted to $10,000, and the acquisition differential was entirely allocated to goodwill. Impairment tests conducted yearly since acquisition yielded a loss of $3,000 in 2019 and a further loss of $2,250 in 2020. Michelangelo uses the cost method to account for the investment. Use the entity theory for calculations. $271,000 $140,000 50,000 81,000 $271,000 The December 31, 2020 inventory of Michelangelo contained purchases made from VanGogh amounting to $10,000. VanGogh sells to Michelangelo at a 40% gross profit. On July 1, 2020 Michelangelo borrowed $60,000 from VanGogh and signed a note bearing interest at 12% per year. Both companies pay income tax at a rate of 40%. REQUIRED: Calculate the balance in the "Investment in VanGogh" account as at December 31, 2020, if Michelangelo had used the equity method.

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Investment in VanGogh 123120 56875 24000 3000 2250 x 70 56875 ... View the full answer