18-16

Cummulative Preferred 100,000.00

Multiplied by 10%
Portion of Income for PS 10,000.00

Net Income 60,000.00

Share of PS 10,000.00
For CS Holders 50,000.00

Equity Earnings
PS 10,000.00 x 20% 2,000.00
CS 50,000.00 x 80% 40,000.00
Total Earnings 42,000.00 a

18-17 Net Income 120,000.00

Percentage 40%
Income from Investment 48,000.00 a

18-18 Reported Net Income 125,000.00

Unrealized Gain on Available for Sale Securities (40,000.00)
Dividends (8,000.00)
Prior period error 35,000.00
Should be Reported NI 112,000.00 c

18-19 There is no significant influence therefore the cost method shall be used.

Balance of Investment 150,000.00

18-20 Equity method because there is significant influence

Investment at acquisition 400,000.00
Share in Net Income 500,000 x 10% 50,000
Less: Share in Dividends 150,000 x 10% 15,000
Balance of Investment 435,000.00 b

18-21 Investment 250,000

Share in Net Income 100,000 x 30% 30,000
Balance 280,000 d
18-22 Year 2017
Dividends are deduction from investment account and shall not be part of
investment income.

Investment Income for 2017 650,000 x 30% 195,000

Year 2016
Should be Income Using the Equity Method
600,000 x 30% 180,000.00
Income Recorded in 2016
Net Income 60,000
Divided Income 20,000 80,000
Adjustment 100,000.00 c

18-23 Investment 50,000 + 150,000 200,000 b