On January $1,20$X$2$ P pays $$100$ million to acquire $50,000$ of the common voting shares of S$,$ which gives

P a $25\%$ ownership interest in S$.$ The January $1,20$X$2$ book value of S$\text{'}$s assets net of liabilities is $$400$

million. During $20$X$2,$ S records income of $$40$ million and pays dividends of $$12$ million, and its December

$31,20$X$2$ book value of assets net of liabilities is $$428$ million. During $20$X$2$ S sold P goods for $$9$ million

that cost S $$4$ million, and P sold $20\%$ of those goods for $$3$ million by the end of $20$X$2.$ P uses the equity

method of accounting for its investment in S$.$

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Questions

$7.$ How much income would P record in $20$X$2$ from its investment in S$?($Your answer should be

in millions. Hence, if your answer is $$50$ million, your answer would be $50.)$

$8.$ What would be P$\text{'}$s December $31,20$X$2$ balance for its equity investment in S$?($Your answer

should be in millions. Hence, if your answer is $$50$ million, your answer would be $50.)$

$9.$ Assume the same facts as in the previous two questions and assume that P sold the remaining

goods acquired from S in $20$X$2$ during $20$X$3.$ Furthermore, during $20$X$3$ S sold P goods for

$$12$ million that cost S $$8$ million, and that P sold all of those goods during $20$X$3.$ Finally, S

recorded income of $$44$ million in $20$X$3$ and paid $$12$ million in dividends during that same

year. How much income would P record in $20$X$3$ from its investment in S$?($Your answer

should be in millions. Hence, if your answer is $$50$ million, your answer would be $50.)$

Answer rating: 100% (QA)

7 Income Recorded by P from Investment in S for 2X2 To calculate Ps share of Ss income for 2X2 we ne... View the full answer