Maurice Tutor

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    Argosy University/ Phoniex University/
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Category > Accounting Posted 05 Aug 2017 My Price 9.00

Killearn Company

Need help:

On July 1, 2013, Killearn Company acquired 88,000 of the outstanding shares of Shaun Company for $13 per share. This acquisition gave Killearn a 25 percent ownership of Shaun and allowed Killearn to significantly influence the investeeAc€?cs decisions.

                As of July 1, 2013, the investee had assets with a book value of $3 million and liabilities of $74,400. At the time, Shaun held equipment appraised at $364,000 above book value; it was considered to have a 7 year remaining life on its books that was undervalued by $972,000. Any remaining excess was attributable to goodwill. Depreciation and amortization are computed using the straight-line method. Killearn applies the equity method for its investment in Shaun.

                ShaunAc€?cs policy is to declare and pay $1 per share cash dividend every April 1 and October 1. ShaunAc€?cs income, earned evenly throughout each year, was $598,000 in 2013, $639,600 in 2014, and $692,400 in 2015.

                In addition, Killearn sold inventory costing $91,200 to Shaun for $152,000 during 2014. Shaun resold $92,000 of this inventory during 2014 and the remaining $60,000 during 2015.

  1. Determine the equity income to be recognized by Killearn during each of these years.

  2. Compute KillearnAc€?cs investment in Shaun CompanyAc€?cs balance as of December 31,2015.

Answers

Maurice Tutor
(5)
Status NEW Posted 05 Aug 2017 10:08 PM My Price 9.00

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