On 1/1/20, Coffee Company purchased 20% of Bean Company outstanding stock for $1,000,000. At the...
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Accounting
On 1/1/20, Coffee Company purchased 20% of Bean Company outstanding stock for $1,000,000. At the date of purchase, Bean Company's total common stockholder's equity was $5,000,000. Assume no fair value/book value difference for Bean Company stockholders' equity exists at 1/1/20.
Coffee Company paid $500,000 in dividends during 2020 and reported net income of $750,000. Coffee's common stock is selling for $6,000,000 at the end of 2020.
For all parts below, use $XXX,XXX format for your answer.
a) If Coffee's intent for the purchase is to invest excess cash for a shorter period of time:
- What would be included as the total dollar amount of investment in bean on Coffee's investment in Bean on 12/31/20?
- What would be the dollar amount included in Grape's stockholders' equity related to Coffee's Investment in Bean on 12/31/20?
b) If Coffee's intent for the purchase is to be able to influence Bean financing and operating decisions since it can now have a seat on Bean's Board of Directors,
- What would be included as the total dollar amount of Coffee's investment in Bean asset on Coffee's balance sheet 12/31/20?
- What dollar amount would be included in Coffee's stockholders' equity related to this investment in Bean on 12/31/20?
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