Business, 15.02.2020 02:13 notsobright10

On January 2, 2021, Miller Properties paid $27 million for 1 million shares of Marlon Company's 6 million outstanding common shares. Miller's CEO became a member of Marlon's board of directors during the first quarter of 2021. The carrying amount of Marlon's net assets was $112 million. Miller estimated the fair value of those net assets to be the same except for a patent valued at $30 million above cost. The remaining amortization period for the patent is 10 years. Marlon reported earnings of $51 million and paid dividends of $3 million during 2021. On December 31, 2021, Marlon's common stock was trading on the NYSE at $26.50 per share.

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Answer from: mluz

The statements are as shown in the solution.

Explanation:

As the question is not visible here, completely, the similar question is found online and is solved for these values. The method is as follows:

For Income Statement

Investment Revenue(Share of Income) is calculated as

$IR=\frac{E_{reported}\times Shares}{Shares_{Outstanding}}$

Here

IR is the investment revenue which is to be calculated

E_reported are the reported earnings which is $51 million

Shares are given as 1 million.

Outstanding shares are given as 6 million

Solving for IR gives

$IR=\frac{E_{reported}\times Shares}{Shares_{Outstanding}}\\IR=\frac{51 Million\times 1 million}{6 million}\\IR=\frac{51 Million\times 1 }{6 }\\IR=\$ 8.5 Million$

Patent Amortization is calculated as

$PA=\frac{P_{value}\times \frac{Shares}{Shares_{Outstanding}}}{Years}$

Here

PA is the patent amortization value which is to be calculated

P_value is the value of patent which is $30 million

Shares are given as 1 million.

Outstanding shares are given as 6 million

Years is the period of 10 years.

Solving for PA gives

$PA=\frac{P_{value}\times \frac{Shares}{Shares_{Outstanding}}}{Years}\\PA=\frac{30 Million \times \frac{1 Million}{6 Million}}{10}\\PA=\$0.5 Million$

So the income statement is given as

Income Statement

1-Investment Revenue (Share of Revenue) | $8.5 Million

2-Patent Amortization Adjustment | ($0.5 Million)

-----------------------------------------------------------------------------------------

Net Income | $8.0 Million

For Investment Statement

Calculation of Dividend is given as

$Div=\frac{D_{reported}\times Shares}{Shares_{Outstanding}}$

Here

Div is the investment entry for dividend which is to be calculated

E_reported are the reported earnings which is $3 million

Shares are given as 1 million.

Outstanding shares are given as 6 million

$Div=\frac{D_{reported}\times Shares}{Shares_{Outstanding}}\\Div=\frac{\$3 Million\times 1 Million}{6 Million}\\Div=\$0.5 Million$

Now the statement of investment is given as

Investment in Company M shares

2021 | | | 2021 | |

| Cost | 27 | | Dividend | 0.5

| Share (income) | 8.5 | | Patent | 0.5

----------------------------------------------------------------------------------------------------------------- a |Total | 35.5 | | Total | 1.0

____________________________________________________________

Balance : $ 34.5 Million

For Statement of Cash Flows

Statement of Cash Flows

For Year Ending December 31, 2021

Cash Flow from Operating Activities

Dividends | $ 0.5 Million

Cash Flow from Investing Activities

Purchase of investment | ($ 27 Million)

Answer from: Quest

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Answer from: Quest

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On January 2, 2021, Miller Properties paid $27 million for 1 million shares of Marlon Company's 6 mi...

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