Chapter 02 - Reporting Intercorporate Interests
4. Based on the preceding information, what amount will Rotor report as the balance in theinvestment account on Dec 31, 2008?A. $150,000B. $157,500C. $153,400D. $153,500
5. Based on the preceding information, what amount of investment income will be reported byRotor for 2008?A. $6,500B. $7,500C. $3,500D. $4,500
6. Based on the preceding information, had Rotor Corporation used the cost method, whatwould have been the balance in the investment account on Dec 31, 2008?A. $150,000B. $157,500C. $153,400D. $153,500
On January 1, 2007, Firewire Company acquired 40 percent of Browser Company's commonstock. For this acquisition, Firewire paid $45,000 above book value. The full differential wasattributed to equipment with a remaining life of ten years and zero salvage value at the date of acquisition. During 2007 and 2008, Browser reported net income of $90,000 and $50,000 and paid dividends of $40,000 and $60,000, respectively. Firewire reported a balance in itsinvestment account of $230,000 on December 31, 2008. It uses the equity method inaccounting for this investment.