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C2-4 Use of the Cost or Equity Method [AICPA Adapted] Analysis Since

Customer Question

C2-4 Use of the Cost or Equity Method [AICPA Adapted]
Analysis

Since Boomer Company’s inception, Madison Company has owned 18 percent of Boomer’s outstanding common stock. Madison provides three key management personnel to Boomer and purchased 25 percent of Boomer’s output during 20X7. Boomer is profitable. On January 2, 20X8, Madison purchased additional common stock to finance Boomer’s expansion, thereby becoming a 30 percent owner. Boomer’s common stock does not have a quoted market price. The stock has always been issued at its book value, which is assumed to approximate its fair value
Required

a. In general, distinguish between investor-income reporting under the cost method and under the equity method. Which method is more consistent with accrual accounting? Why?

b. Prior to January 2, 20X8, what specific factors should Madison have considered in determining the appropriate method of accounting for its investment in Boomer?

c. Assume that Madison used the cost method in accounting for its investment in Boomer prior to January 2, 20X8. Describe the book adjustments required on January 2, 20X8, when Madison became owner of 30 percent of Boomer’s outstanding common stock
Submitted: 5 years ago.
Category: Homework
Expert:  Manal Elkhoshkhany replied 5 years ago.
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Customer: replied 5 years ago.

Hi, Thanks for giving me the soultions. Yes I am using 6th edition, do u think I can find the soultion manual for this book because no one is selling right now the last two was taking if so please let me know.

 

thanks again

Expert:  Manal Elkhoshkhany replied 5 years ago.

Hello

 

Unfortunately I do not know anyone who sells solution manuals, but you are welcome to ask any question here and I will answer it for you

 

Regards,

Customer: replied 5 years ago.

ok thank you. for the next time how can I reach you direct since you have my book. also Do I just write you the chapter and the question number or type it to you.

 

thank you

Expert:  Manal Elkhoshkhany replied 5 years ago.

You are welcome

 

Just type "For BusinessTutor" at the beginning of the post, and you do not have to type the whole question, just the number

 

Regards,

Customer: replied 5 years ago.

Great thank you so much for your help, until the next time then.

thanks

Expert:  Manal Elkhoshkhany replied 5 years ago.

Until next time

 

Take care Smile

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