( Fair Value and Equity Method Compared )
Gregory Inc . acquired 20 % of the outstanding common stock of Handerson Inc . on December 31 , 2012 . The purchase price was $ 1,320,000 for 50,000 shares . Handerson Inc . declared and paid an $ 0.87 per share cash dividend on June 30 and on December 31 , 2013 . Handerson reported net income of $ 741,000 for 2013 . The fair value of Handerson ‟ s stock was $ 32 per share at December 31 , 2013 .
Question 15 ( Call Option )
On January 2 , 2012 , Jones Company purchases a call option for $ 450 on Merchant common stock . The call option gives Jones the option to buy 1,000 shares of Merchant at a strike price of $ 50 per share . The market price of a Merchant share is $ 50 on January 2 , 2012 ( the intrinsic value is therefore $ 0 ). On March 31 , 2012 , the market price for Merchant stock is $ 60 per share , and the time value of the option is $ 200 .
Question 16
In 2012 , Amirante Corporation had pretax financial income of $ 207,000 and taxable income of $ 166,400 . The difference is due to the use of different depreciation methods for tax and accounting purposes . The effective tax rate is 40 %. Compute the amount to be reported as income taxes payable at December 31 , 2012 .
Question 17
At December 31 , 2012 , Fell Corporation had a deferred tax liability of $ 732,802 , resulting from future taxable amounts of $ 2,155,300 and an enacted tax rate of 34 %. In May 2013 , a new income tax act is signed into law that raises the tax rate to 42 % for 2013 and future years . Prepare the journal entry for Fell to adjust the deferred tax liability .
Question 18