Creating balance sheet using mark-to-market method

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Reference no: EM1310177

1) Novi Company owns 25% of Troy Company. Due to anti-trust issues, Novi Company is restricted from having any sort of say regarding operation of Troy Company. As such, Novi Company accounts for its investment in Troy Company by applying Mark-to-Market Method. At the commencement of 2006, Novi's investment in Troy Company was reflected on balance sheet at= $180,000. In 2006, Troy Company earned= $70,000 in total Net Income and stated and paid dividends totalling $10,000. At the ending of 2006, fair market value of Novi's investment in Troy Company was= $200,000.

i) How much will Novi Company report as income/revenue on its income statement in 2006 relative to its investment in Troy Company?

ii) Applying the Mark-to-market method, what will Novi Company show on its balance sheet at the end of 2006 to reflect its investment in Troy Company?

iii) What would Novi Company recognize on its Income Statement as Equity Income for its investment in Troy if Novi Company employed the Equity Method rather than the Mark-to-market method to account for its investment in Troy Company?

Reference no: EM1310177

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