90.2K

Verified Solution

Link Copied!

On December $31,2019,$ Akron, Inc., purchased $5$ percent of Zip Company's common shares on the open market in exchange for $$15,700.$ On December $31,2020,$ Akron, Inc., acquires an additional $25$ percent of Zip Company's outstanding common stock for $$96,500.$ On December $31,2019,$ Akron, Inc., purchased $5$ percent of Zip Company's common shares on the open market in exchange for

$$15,700.$ On December $31,2020,$ Akron, Inc., acquires an additional $25$ percent of Zip Company's outstanding common stock for

$$96,500.$

During the next two years, the following information is available for Zip Company:

At December $31,2020,$ Zip reports a net book value of $$294,000.$ Akron attributed any excess of its $30$ percent share of Zip's fair over

book value to its share of Zip's franchise agreements. The franchise agreements had a remaining life of $10$ years at December $31,$

$2020.$

a$.$ Assume Akron applies the equity method to its Investment in Zip account:

What amount of equity income should Akron report for $2021?$

On Akron's December $31,2021,$ balance sheet, what amount is reported for the Investment in Zip account?

b$.$ Assume Akron uses fair$-$value accounting for its Investment in Zip account:

What amount of income from its investment in Zip should Akron report for $2021?$

On Akron's December $31,2021,$ balance sheet, what amount is reported for the Investment in Zip account?

During the next two years, the following information is available for Zip Company:

Income Dividends Declared Common Stock

Fair Value $(12/31)$

$2019$ $$314,000$

$2020$ $$74,000$ $$6,000386,000$

$202186,00014,700489,000$

At December $31,2020,$ Zip reports a net book value of $$294,000.$ Akron attributed any excess of its $30$ percent share of Zip's fair over book value to its share of Zip's franchise agreements. The franchise agreements had a remaining life Assume Akron applies the equity method to its Investment in Zip account:

What amount of equity income should Akron report for $2021?$

On Akron$$s December $31,2021,$ balance sheet, what amount is reported for the Investment in Zip account?

Assume Akron uses fair$-$value accounting for its Investment in Zip account:

What amount of income from its investment in Zip should Akron report for $2021?$

On Akron$$s December $31,2021,$ balance sheet, what amount is reported for the Investment in Zip account?

Answer & Explanation Solved by verified expert

See Answer