Question #1

30 marks

1.

Consider the following data for intercorporate investments:

Year	Shares purchased (sold)	Price/share	Price/share
		Jan 1	Dec 31
20x1	220	$74	$62
20x2	(85)	58	77

All sales and purchases are assumed to occur on January 1. Price may vary from price on previous day (December 31).

	20x1	20x2
Investee eps	$7	$8
Investee dps	4	4

Investee eps (earnings per share); Investee dividend per share (dps)

Consider Trading, and the Equity method for classifying investment

Required:

a. Show the B/S carrying amount for each of the 2 years if the investment is classified as TRADING, and EQUITY METHOD (Show calculations) (7 marks)

20X120X2

TRADING

EQUITY-method

b. Show the total income recognized for each of the 2 years if the investment is classified as TRADING, and EQUITY METHOD(Show calculations)(11marks)

20X120X2

TRADING

EQUITY-method

2.

Pension information:

Current salary$40,000

Years until retirement3

Annual compensation increases5%

Discount rate10%

Benefit2%

Required:

Construct the pension table. (12 marks).