Steven Company Owns 40% of the Outstanding Voting Common Stock

question 41

Short Answer

Steven Company owns 40% of the outstanding voting common stock of Nicole Corp. and has the ability to significantly influence the investee's operations. On January 3, 2011, the balance in the Investment in Nicole Corp. account was $503,000. Amortization associated with this acquisition is $12,000 per year. During 2011, Nicole earned net income of $120,000 and paid cash dividends of $40,000. Previously in 2010, Nicole had sold inventory costing $35,000 to Steven for $50,000. All but 25% of that inventory had been sold to outsiders by Steven during 2010. Additional sales were made to Steven in 2011 at a transfer price of $75,000 that had cost Nicole $54,000. Only 10% of the 2011 purchases had not been sold to outsiders by the end of 2011.
What was the balance in the Investment in Nicole Corp. account at December 31, 2011?

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Definitions:

One-tailed

A statistical test hypothesis that specifies the direction of the expected difference or relationship.

Two-tailed

A type of statistical test that considers both ends of the distribution for checking the significance of the test hypothesis.

Alternative Hypothesis

A hypothesis that contradicts the null hypothesis, proposing that there is a significant difference or relationship.

Sampling Distribution

The distribution of a statistic, like the mean or proportion, derived from a large number of samples of a specific size drawn from a specific population.