Question #51

- If Anderson Company accounts for the Birschbach Company shares using the equity method, the change in carrying value from 2012 to 2013 is closest to: A) +$2,650,000. B) +$50,000. C) +$225,000. Prior to 2007, Company X (reporting under U.S. GAAP) had never made any acquisitions of other companies. However, on January 2, 2007, it went on a buying spree, purchasing 10% of Company A for $10,000; 30% of Company B for $20,000; 40% of Company C for $80,000; and 70% of Company D for $168,000. Below are the balance sheets for the five companies (in thousands) just prior to the purchase. Company X A B C D Cash 400 10 20 30 40 Other assets 1,600 90 180 270 360 Total assets 2,000 100 200 300 400 Liabilities 300 40 80 120 160 Equity 1,700 60 120 180 240 Total 2,000 100 200 300 400 During 2007, the companies generated the following sales, income, and dividends: Company X A B C D Revenue 2,000 100 200 300 400 Net income 200 10 20 30 40 Dividends 4 8 12 16 The company accounts for the acquisitions based on typical ownership proportion guidelines. Investment in financial assets are classified as FVOCI.