Asked by joseph sciotto on Jun 29, 2024
Verified
Refer to Exhibit 15-2.The income reported by Clumzee during 2010 from its investment in the Nimble Company should be
A) $ 600, 000
B) $2, 100, 000
C) $2, 400, 000
D) $2, 900, 000
Depreciable Plant Assets
Long-term tangible assets of a business used in operations, subject to depreciation over their useful lives.
Underlying Assets
The financial assets (such as stocks, bonds, or commodities) that determine the value of a derivative instrument.
Excess Purchase Price
The amount by which the purchase price of an asset exceeds its fair market value, often seen in acquisitions where the buyer pays more than the asset's perceived worth.
- Understand and apply the equity method of accounting for investments.
Verified Answer
ND
Nessim DerkaJul 01, 2024
Final Answer :
B
Explanation :
Clumzee owns 30% of Nimble, so they are entitled to 30% of Nimble's net income and dividends.
Net income: 30% x $8,000,000 = $2,400,000
Dividends: 30% x $2,000,000 = $600,000
Total income for Clumzee from Nimble during 2010 is $2,400,000 + $600,000 = $2,100,000. Therefore, the correct answer is B.
Net income: 30% x $8,000,000 = $2,400,000
Dividends: 30% x $2,000,000 = $600,000
Total income for Clumzee from Nimble during 2010 is $2,400,000 + $600,000 = $2,100,000. Therefore, the correct answer is B.
Learning Objectives
- Understand and apply the equity method of accounting for investments.