Purchase Solution

On Ace's December 31, 2005, balance sheet, what amount is reported for the Investment in Zach account?

Not what you're looking for?

Ask Custom Question

On January 1, 2004, Ace acquires 15 percent of Zach's outstanding common stock for $52,000 and classifies the investment as an available-for-sale security. On January 1, 2005, Ace buys an additional 10 percent of Zach for $43,800. This second purchase gives Ace the ability to influence Zach's decision making significantly.

During 2004 and 2005, Zach reports the following:

Income Dividends Market Value

2004 $80,000 $30,000 $60,000
2005 100,000 40,000 117,000

In each purchase, Ace attributes any excess of cost over book value to Zach's franchise agreements that had a remaining life of 10 years at January 1, 2004. As of December 31, 2005, Zach reports a net book value of $390,000.
a. On Ace's December 31, 2005, balance sheet, what amount is reported for the Investment in Zach account?
b. What amount of equity income should Ace report for 2005?
c. Prepare the January 1, 2005, journal entries to retroactively adjust the Investment in Zach account to the equity method.

Attachments
Purchase this Solution

Solution Summary

Equity method computations shown for you.

Purchase this Solution


Free BrainMass Quizzes
Organizational Behavior (OB)

The organizational behavior (OB) quiz will help you better understand organizational behavior through the lens of managers including workforce diversity.

Writing Business Plans

This quiz will test your understanding of how to write good business plans, the usual components of a good plan, purposes, terms, and writing style tips.

Transformational Leadership

This quiz covers the topic of transformational leadership. Specifically, this quiz covers the theories proposed by James MacGregor Burns and Bernard Bass. Students familiar with transformational leadership should easily be able to answer the questions detailed below.

Basic Social Media Concepts

The quiz will test your knowledge on basic social media concepts.

Understanding the Accounting Equation

These 10 questions help a new student of accounting to understand the basic premise of accounting and how it is applied to the business world.