Calculate comparative income statements
On its 2015 comparative income statements, how much income would Anderson report for 2013 and 2014? What would the equity income in 2013 and 2014?Anderson acquires 10 percent of the outstanding voting shares of Barringer on January 1, 2013, for $107,080 and categorizes the investment as an available-for-sale security. An additional 20 percent of the stock is purchased on January 1, 2014, for $245,200, which gives Anderson the ability to significantly influence Barringer. Barringer has a book value of $942,000 at January 1, 2013, and records net of $220,000 for that year. Barringer declared and paid dividends of $92,000 during 2013. The book values of Barringer’s asset and liability accounts are considered as equal to fair values except for a copyright whose value accounted for Anderson’s excess cost in each purchase.
a. If Anderson sells its entire investment in Barringer on January 1, 2016, for $493,205 cash, what is the impact on Anderson’s income? Gain on sale of investment _____?
b. What amount of equity income should Anderson recognize for the year 2015? Equity income in 2015 would be________?
| Assume that Anderson sells inventory to Barringer during 2014 and 2015 as follows: |
| Year | Cost to Anderson |
Price to Barringer |
Year-End Balance (at Transfer Price) |
| 2014 | $40,250 | $57,500 | $23,000 (sold in following year) |
| 2015 | 37,125 | 67,500 | 46,000 (sold in following year) |
Answer preview for Calculate comparative income statements
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