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Chapter 12: 16Q (page 610)
What constitutes 鈥渟ignificant influence鈥� when an investor鈥檚 financial interest is below the 50% level?
Significant influence constitutes that the investor participates in management, participation in the process of making policy, etc.
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Hiram Co. uses the equity method to account for investments in common stock. What accounting should be made for dividends received from these investments subsequent to the date of investment?
On July 1, 2017, Wheeler Company purchased \(4,000,000 of Duggan Company鈥檚 8% bonds, due on July 1, 2024. The bonds, which pay interest semiannually on January 1 and July 1, were purchased for \)3,500,000 to yield 10%. Determine the amount of interest revenue Wheeler should report on its income statement for the
year ended December 31, 2017.
Question: (Accounting for Organization Costs) Angelou Corporation was organized in 2016 and began operations at the beginning of 2017. The company is involved in interior design consulting services. The following costs were incurred prior to the start of operations.
Attorney fees in connection with organization of the company | \(15,000 |
Purchase of drafting and design equipment | 10,000 |
Costs of meetings of incorporators to discuss organizational activities | 7,000 |
State filing fees to incorporate | 1,000 |
\)33,000 |
Instructions
What are factors to be considered in estimating the useful life of an intangible asset?
Question: (Correct Intangible Assets Account) Reichenbach Co., organized in 2016, has set up a single account for all intangible assets. The following summary discloses the debit entries that have been recorded during 2017 and 2018.
Intangible Assets | ||
7/1/17 | 8-year franchise; expiration date 6/30/25 | \( 48,000 |
10/1/17 | Advance payment on laboratory space (2-year lease) | 24,000 |
12/31/17 | Net loss for 2017 including state incorporation fee, \)1,000, and related legal fees of organizing, $5,000 (all fees incurred in 2017) | 16,000 |
1/2/18 | Patent purchased (10-year life) | 84,000 |
3/1/18 | Cost of developing a secret formula (indefinite life) | 75,000 |
4/1/18 | Goodwill purchased (indefinite life) | 278,400 |
6/1/18 | Legal fee for successful defense of patent purchased above | 12,650 |
9/1/18 | Research and development costs | 160,000 |
Instructions
Prepare the necessary entries to clear the Intangible Assets account and to set up separate accounts for distinct types of intangibles. Make the entries as of December 31, 2018, recording any necessary amortization and reflecting all balances accurately as of that date. (Ignore income tax effects.)
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