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

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

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

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

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Customer: replied 8 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



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



Customer: replied 8 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

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



Customer: replied 8 years ago.

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


Until next time


Take care Smile

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