The following additional information was obtained from the financial statements for Skittles: Net income-year ended December 31, 2024 Net income-year ended December 31, 2025 Dividends paid to common shareholders in 2024 Dividends paid to common shareholders in 2025 $30,000 $70,000 $ 0 $60,000
The following additional information was obtained from the financial statements for Skittles: Net income-year ended December 31, 2024 Net income-year ended December 31, 2025 Dividends paid to common shareholders in 2024 Dividends paid to common shareholders in 2025 $30,000 $70,000 $ 0 $60,000
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter12: Intangibles
Section: Chapter Questions
Problem 18E
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Transcribed Image Text:Use the following information below to answer questions 1 and 2.
On January 2, 2024, Rainbow, Inc. purchased 18% of Skittles Corporation's common sto
for $120,000. At the time of the investment, the book value and fair value of Skittles' net
assets were equal except for a tract of land which had appreciated by $75,000.
The following additional information was obtained from the financial statements for
Skittles:
Net income-year ended December 31, 2024
Net income-year ended December 31, 2025
Dividends paid to common shareholders in 2024
Dividends paid to common shareholders in 2025
$30,000
$70,000
$
0
$60,000
On December 31, 2024, the fair value of Rainbow's investment in the common stock of
Skiles was $115,000, and on December 31, 2025, its fair value was $140,000.
1. Assume Rainbow does not have significant influence over Skittles. How much would
Rainbow report in its 2025 income statement related to this investment?
A. $60,000
B. $35,800
C. $30,800
D. $12,600
E. $1,800
2. Assume Rainbow does have significant influence over Skittles. How much would
Rainbow report as its investment in Skittles on its 12/31/2025 balance sheet?
A. $120,000
B. $121,800
C. $127,200
D. $138,000
E. $140,000
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