Fair Value Method Gant Company purchased 20 percent of the outstanding shares of Temp Company for $70,000 on January 1, 20X6. The following results are reported for Temp Company: 20X6 20X7 20X8 Net income $40,000 $35,000 $60,000 Dividends paid 15,000 30,000 20,000 Fair value of shares held by Gant: January 1 70,000 89,000 86,000 December 31 89,000 86,000 97,000 Required Determine the amounts reported by Gant as income from its investment in Temp for each year and the balance in Gant’s investment in Temp at the end of each year assuming that Gant uses the following methods in accounting for its investment in Temp: a. Cost method. b. Equity method c. Fair value method.

Fair Value Method Gant Company purchased 20 percent of the outstanding shares of Temp Company for $70,000 on January 1, 20X6. The following results are reported for Temp Company: 20X6 20X7 20X8 Net...

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Fair Value Method

Gant Company purchased 20 percent of the outstanding shares of Temp Company for $70,000 on January 1, 20X6. The following results are reported for Temp Company:

	20X6	20X7	20X8
Net income	$40,000	$35,000	$60,000
Dividends paid	15,000	30,000	20,000
Fair value of shares held by Gant:
January 1	70,000	89,000	86,000
December 31	89,000	86,000	97,000

Required

Determine the amounts reported by Gant as income from its investment in Temp for each year and the balance in Gant’s investment in Temp at the end of each year assuming that Gant uses the following methods in accounting for its investment in Temp:

a. Cost method.

b. Equity method

c. Fair value method.

Answered Same Day Dec 24, 2021

Solution

David answered on Dec 24 2021

102 Votes

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Fair Value Method Gant Company purchased 20 percent of the outstanding shares of Temp Company for $70,000 on January 1, 20X6. The following results are reported for Temp Company: 20X6 20X7 20X8 Net...

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