On January 4, 2017, Harley, Inc. acquired 40% of the outstanding common stock of Bike Co. for
Question:
On January 4, 2017, Harley, Inc. acquired 40% of the outstanding common stock of Bike Co. for $2,400,000. This investment gave Harley the ability to exercise significant influence over Bike. Bike’s assets on that date were recorded at $10,500,000 with liabilities of $4,500,000. There were no other differences between books and fair values.
In 2017, Bike reported net income of $500,000. For 2018, Bike reported net income of $800,000. Dividends of $300,000 were paid in each of these two years.
How much income did Harley report from Bike for 2017?
A) $120,000.
B) $200,000.
C) $300,000.
D) $320,000.
E) $500,000.
How much income did Harley report from Bike for 2018?
A) $120,000.
B) $200,000.
C) $300,000.
D) $320,000.
What was the reported balance of Harley’s Investment in Bike Co. at December 31, 2017?
A) $880,000.
B) $2,400,000.
C) $2,480,000.
D) $2,600,000.
What was the reported balance of Harley’s Investment in Bike Co. at December 31, 2018?
A) $2,400,000.
B) $2,480,000.
C) $2,500,000.
D) $2,680,000.
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Financial Reporting Financial Statement Analysis and Valuation a strategic perspective
ISBN: 978-1285190907
8th edition
Authors: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
