Asked by Jared Myers on May 07, 2024
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Alcor and Vax Inc, both Canadian private companies, formed a joint venture on January 1, 2020 called Inventure Inc. Alcor and Vax each hold a 50% in the venture and share equally in any profits or losses arising from the venture.
The following statements were prepared on December 31, 2020.
Balance Sheets
Alcor Inventure Current Assets $40,000$20,000 Investment in Inventure $20,000 Fixed Assets $200,000$80,000 Accumulated Depreciation ($80,000)($10,000) Other Assets $50,000$60,000 Total Assets $230,000$150,000 Current Liabilities $34,000$70,000 Long-Term Debt $20,000$30,000 Common Shares $90,000$40,000 Retained Earnings, Jan 1 $56,000 Net Income for the year $30,000$10,000 Liabilities and Equity $230,000$150,000\begin{array}{|l|r|r|}\hline & \text { Alcor } & \text { Inventure } \\\hline \text { Current Assets } & \$ 40,000 & \$ 20,000 \\\hline \text { Investment in Inventure } & \$ 20,000 & \\\hline \text { Fixed Assets } & \$ 200,000 & \$ 80,000 \\\hline \text { Accumulated Depreciation } & (\$ 80,000) & (\$ 10,000) \\\hline \text { Other Assets } & \$ 50,000 & \$ 60,000 \\\hline \text { Total Assets } & \$ 230,000 & \$ 150,000 \\\hline \text { Current Liabilities } & \$ 34,000 & \$ 70,000 \\\hline \text { Long-Term Debt } & \$ 20,000 & \$ 30,000 \\\hline \text { Common Shares } & \$ 90,000 & \$ 40,000 \\\hline \text { Retained Earnings, Jan 1 } & \$ 56,000 & \\\hline \text { Net Income for the year } & \$ 30,000 & \$ 10,000 \\\hline \text { Liabilities and Equity } & \$ 230,000 & \$ 150,000 \\\hline\end{array} Current Assets Investment in Inventure Fixed Assets Accumulated Depreciation Other Assets Total Assets Current Liabilities Long-Term Debt Common Shares Retained Earnings, Jan 1 Net Income for the year Liabilities and Equity Alcor $40,000$20,000$200,000($80,000)$50,000$230,000$34,000$20,000$90,000$56,000$30,000$230,000 Inventure $20,000$80,000($10,000)$60,000$150,000$70,000$30,000$40,000$10,000$150,000 Other Information:
During 2020, Inventure purchased $10,000 from Alcor. Alcor recorded a gross profit of $2,000 on these sales.
On December 31, 2020, Inventure's inventories contained half of the merchandise purchased from Alcor. Alcor uses the cost method to account for its Investment in Inventure and uses the equity method to report its investment in the joint venture. An income tax allocation rate of 20% applies.
Prepare Alcor's Balance Sheet as at December 31, 2020.
Balance Sheet
A financial statement that shows a company's financial position at a specific point in time, detailing assets, liabilities, and shareholders' equity.
Cost Method
An accounting approach used for investments, where the investment is recorded at its original purchase cost without considering changes in its market value.
Equity Method
An accounting technique used to record investments in other companies, where the investment is reported as an asset and the investor's share of the investee's income is reported in the income statement.
- Evaluate the effects of joint ventures on the financial statements and balance reports of investing corporations, with a focus on equity method accounting.
Verified Answer
DP
Dylan PutmanMay 11, 2024
Final Answer :
Alcor Inc.
Balance Sheet
As at December 31, 2020
Current Assets $40,000 Investment in Inventure ($20,000+$4,600)$24,600 Fixed Assets $200,000 Accumulated Depreciation $80,000) Other Assets $50,000 Total Assets $234,600 Current Liabilities $34,000 Long-Term Debt $20,000 Common Shares $90,000 Retained Earnings $90,600 Liabilities and Equity $234,600\begin{array}{|l|r|}\hline \text { Current Assets } & \$ 40,000 \\\hline \text { Investment in Inventure }(\$ 20,000+\$ 4,600) & \$ 24,600 \\\hline \text { Fixed Assets } & \$ 200,000 \\\hline \text { Accumulated Depreciation } & \$ 80,000) \\\hline \text { Other Assets } & \$ 50,000 \\\hline \text { Total Assets } & \$ 234,600 \\\hline \text { Current Liabilities } & \$ 34,000 \\\hline \text { Long-Term Debt } & \$ 20,000 \\\hline \text { Common Shares } & \$ 90,000 \\\hline \text { Retained Earnings } & \$ 90,600 \\\hline \text { Liabilities and Equity } & \$ 234,600\\\hline\end{array} Current Assets Investment in Inventure ($20,000+$4,600) Fixed Assets Accumulated Depreciation Other Assets Total Assets Current Liabilities Long-Term Debt Common Shares Retained Earnings Liabilities and Equity $40,000$24,600$200,000$80,000)$50,000$234,600$34,000$20,000$90,000$90,600$234,600
Balance Sheet
As at December 31, 2020
Current Assets $40,000 Investment in Inventure ($20,000+$4,600)$24,600 Fixed Assets $200,000 Accumulated Depreciation $80,000) Other Assets $50,000 Total Assets $234,600 Current Liabilities $34,000 Long-Term Debt $20,000 Common Shares $90,000 Retained Earnings $90,600 Liabilities and Equity $234,600\begin{array}{|l|r|}\hline \text { Current Assets } & \$ 40,000 \\\hline \text { Investment in Inventure }(\$ 20,000+\$ 4,600) & \$ 24,600 \\\hline \text { Fixed Assets } & \$ 200,000 \\\hline \text { Accumulated Depreciation } & \$ 80,000) \\\hline \text { Other Assets } & \$ 50,000 \\\hline \text { Total Assets } & \$ 234,600 \\\hline \text { Current Liabilities } & \$ 34,000 \\\hline \text { Long-Term Debt } & \$ 20,000 \\\hline \text { Common Shares } & \$ 90,000 \\\hline \text { Retained Earnings } & \$ 90,600 \\\hline \text { Liabilities and Equity } & \$ 234,600\\\hline\end{array} Current Assets Investment in Inventure ($20,000+$4,600) Fixed Assets Accumulated Depreciation Other Assets Total Assets Current Liabilities Long-Term Debt Common Shares Retained Earnings Liabilities and Equity $40,000$24,600$200,000$80,000)$50,000$234,600$34,000$20,000$90,000$90,600$234,600
Learning Objectives
- Evaluate the effects of joint ventures on the financial statements and balance reports of investing corporations, with a focus on equity method accounting.