Question :
1. During January 2010, Wells, Inc. obtains 30% of the outstanding common stock of Wilton Co. for $1,400,000. This investment gave Wells the ability to exercise major influence over Wilton. Wilton's assets on that date were recorded at $6,400,000 with liabilities of $3,000,000. Any excess of cost over book value of Wells' investment was attributed to unrecorded patents having a outstanding needful life of ten years.
In 2010, Wilton reported total income of $600,000. For 2011, Wilton reported total income of $750,000. Dividends of $200,000 were paid in each of these two years. What was the reported balance of Wells Investment in Wilson Co. at December 31, 2011?
2. On 4th January, 2011, Watts Co. purchased 40,000 shares (40 percent) of the common stock of Adams Corp., paying $800,000. There was no goodwill or other cost allocation related with the investment. Watts has major influence over Adams. During 2011, Adams reported income of $200,000 and paid dividends of $80,000. On 2nd January, 2012, Watts sold 5,000 shares for $125,000. Determine the balance in the investment account after the shares had been sold?
3. Tower Inc. owns 30 percent of Yale Co. and applies the equity technique. During the existing year, Tower bought inventory costing $66,000 and then sold it to Yale for $120,000. At year-end, only $24,000 of merchandise was still being held by Yale. Evaluate amount of intra-entity inventory profit must be deferred by Tower?
4. On 1st January, 2011, Pacer Company paid $1,920,000 for 60,000 shares of Lennon Co.'s voting common stock which shows a 45% investment. No allocation to goodwill or other specific account was made. Important influence over Lennon was achieved by this acquisition. Lennon distributed a dividend of $2.50 per share during 2011 and reported total income of $670,000. What was the balance in the Investment in Lennon Co. account found in the financial records of Pacer as of 31st December, 2011?
5. On January 1, 2011, Bangle Company purchased 30 percent of the voting common stock of Sleat Corp. for $1,000,000. Any excess of cost over book value was assigned to goodwill. During 2011, Sleat paid dividends of $24,000 and reported a net loss of $140,000. Evaluate the balance in the investment account on 31st December, 2011?