Accounting for the Equity Investment When Price Exceeds Book Value Assume an investor purchases all of the stock of the investee in a stock purchase for $1,800. The investee's balance sheet on the date of purchase is as follows: Accounts receivable $150 Mortgage payable $150 300 1500 1200 Stockholders equity $1.650 Tocal liabilities and equity $1.650 Building Talasses In this example, the amount paid (ie, $1,800) is $300 greater than the book value of the net assets of the investee (le, $1,500). Assume the additional $300 of purchase price relates to an unrecognized patent held by the investee that has a remaining useful life of 10 years on the acquisition date. We also assume, subsequent to the purcha investee reports net income of $300 and pays $90 in dividends to the investor. Required a. Provide the journal entry to recognize the Equity Income by the investor. b. Provide the journal entry to record the receipt of the dividend. c. Provide the journal entry to record the amortization of the patent asset. C ered the receipt of dividends) Debit Credit

Accounting for the Equity Investment When Price Exceeds Book Value Assume an investor purchases all of the stock of the investee in a stock purchase for $1,800. The investee's balance sheet on the date of purchase is as follows: Accounts receivable $150 Mortgage payable $150 300 1500 1200 Stockholders equity $1.650 Tocal liabilities and equity $1.650 Building Talasses In this example, the amount paid (ie, $1,800) is $300 greater than the book value of the net assets of the investee (le, $1,500). Assume the additional $300 of purchase price relates to an unrecognized patent held by the investee that has a remaining useful life of 10 years on the acquisition date. We also assume, subsequent to the purcha investee reports net income of $300 and pays $90 in dividends to the investor. Required a. Provide the journal entry to recognize the Equity Income by the investor. b. Provide the journal entry to record the receipt of the dividend. c. Provide the journal entry to record the amortization of the patent asset. C ered the receipt of dividends) Debit Credit

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

Chapter13: Investments And Long-term Receivables

Section: Chapter Questions

Problem 15P: Investments in Equity Securities Manson Incorporated reported investments in equity securities of...

See similar textbooks

Similar questions

Accounting Assume an investor company purchases all of the stock of the investee company in a stock purchase for $900 on 1/1/2022. The investee's balance sheet on the date of purchase is as follows: Accounts receivable $75 Mortgage payable $75 Inventories $150 Building $600 Stockholders' equity $750 Total assets $825 Total liabilities and equity $825 Assume the additional purchase price relates to the b uilding value not reported on investee company's balance sheet. The building held by the investee has a remaining useful life of 10 years on the acquisition date and depreciated based on the straight-line method. Also assume, subsequent to the purchase, the investee reports net income of $150 and pays $45 in dividends to the investor during 2022. Required: Provide all necessary journal entries related to this investment for the investor company using the equity method during 2022
Investments in Equity Securities Manson Incorporated reported investments in equity securities of 60,495 as a current asset on its December 31, 2018, balance sheet. An analysis of Mansons investments on December 31, 2018, reveals the following: During 2019, the following transactions related to Mansons investments occurred: Required: 1. Assuming Manson prepares quarterly financial statements, prepare journal entries to record the preceding information. 2. Show the items of income or loss from investment transactions that Manson reports for each quarter of 2019. 3. Show how Mansons investments are reported on the balance sheet on March 31, 2019; June 30, 2019; September 30, 2019; and December 31, 2019.
During 2021, Anthony Company purchased debt securities as a long-term investment and classified them as trading. All securities were purchased at par value. Pertinent data are as follows: The net holding gain or loss included in Anthonys income statement for the year should be: a. 0 b. 3,000 gain c. 9,000 loss d. 12,000 loss
Investments in Equity Securities Noonan Corporation prepares quarterly financial statements and invests its excess funds in marketable securities. At the end of 2018, Noonans portfolio of investments consisted of the following equity securities: Dunne the first half of 2019, Noonan engaged in the following investment transactions: Required: 1. Record Noonans investment transactions for January 6 through June 30, 2019. 2. Show the items of income or loss from investment transactions that Noonan reports for each of the first and second quarters of 2019. 3. Show how the preceding items are reported on the first and second quarter 2019 ending balance sheets, assuming that management expects to dispose of the Keene and Sachs securities within the next year.
Classifying Investments in Securities Match each security listed below with its usual classification: (1) trading securities, (2) available-for-sale securities, (3) equity method securities, (4) held-to-maturity securities, or (5) equity securities measured at FV-NI. a. Abbot common stock, no-par; acquired to use temporarily idle cash with intent to sell next month. b. 30% interest in Packaging Inc.; acquired to drive costs down through vertical integration. c. Mack stock held in trading account. d. Hasten Inc.'s 10-year bonds acquired. Hasten intends to hold to maturity, but may need to sell the bonds earlier for cash. e. Staufer common stock, par $5; acquired to gain a significant influence, but not control. f. Frazer bonds, 9% mature at the end of 10 years; acquired with the intent and ability to hold for 10 years. g. Foreign Corp. common stock; a 30% interest acquired, but difficulties encountered in an attempt to obtain representation on the Foreign…
The following was reported by Church Financial in its December 31, 2024, financial statements: Investments at FVTPL, December 31, 2023 Investments at FVTPL, December 31, 2024. Investment income or (loss) Additional information: 1. 2. 3. $13,400 18,300 (600) The investments at FVTPL are investments in equity securities held for trading purposes. Investment income or loss consists of: holding gain on the FVTPL investments of $3,100, and loss on sale of the FVTPL investments of $3,700. The carrying amount of the FVTPL investment sold was $4,900.
Brief Exercises Journalize entries for debt investments. BEH.1 (LO 1), AP Craig Corporation purchased debt investments for $40,800 on January 1, 2022. On July 1, 2022, Craig received cash interest of $1,660. Journalize the purchase and the receipt of interest. Assume no interest has been accrued. Journalize entries for stock investments. GRANT Docombor 1 the
Assessing Financial Statement Effects of Equity Method SecuritiesUse the financial statement effects template to record the following transactions involving investments in marketable securities accounted for using the equity method.a. Purchased 12,000 common shares of Bakersfield Co. at $10 per share; the shares represent 30% ownership in Bakersfield.b. Received a cash dividend of $1.50 per common share from Bakersfield.c. Bakersfield reported annual net income of $75,000.d. Sold all 12,000 common shares of Bakersfield for $128,500.Use negative signs with answers, if appropriate. Balance Sheet Income Statement Noncash Contrib. Earned Transaction Cash Asset + Assets = Liabilities + Captial + Capital Revenues - Expenses = Net income a. Purchased shares of Bakersfield. Answer Answer Answer Answer Answer Answer Answer Answer b. Received cash dividend from Bakersfield. Answer Answer Answer Answer Answer Answer Answer Answer c.…
Use the following information on a company’s investments in equity securities to answer questions 1- 2 below. The company’s accounting year ends December 31. Investment Date of acquisition Cost Fair value 12/31/16 Date sold Selling price Ajax Company stock 6/20/16 $40,000 $35,000 2/10/17 $32,000 Bril Corporation stock 5/1/16 20,000 N/A 11/15/16 26,000 Coy Company stock 8/2/16 16,000 16,500 1/17/17 23,000 1. If the above investments are categorized as trading securities, what amount is reported for gain or loss on securities, on the 2016 income statement? 2. If the above investments are categorized as trading securities, what amount is reported for gain or loss on securities, on the 2017 income statement?
Paul Company presented the following information pertaining to its investments in equity securities. FVPL FVOCICost P1,000,000 P1,000,000Market value December 31, 2020 1,050,000 980,000 December 31, 2019 950,000 920,000 2.What amount should Paul report as unrealized gains/losses in the shareholders' equity of its December 31, 2020 statement of financial position?
Assessing Financial Statement Effects of Trading and Available-for-Sale Securities Use the financial statement effects template to record the following four transactions involving investments in marketable securities. Use negative signs with your answers, when appropriate. Balance Sheet Transaction Cash Asset + (1) (2) 1. Purchased 6,000 common shares of Liu, Inc., at $11.50 cash per share. 2. Received a cash dividend of $1.40 per common share from Liu. 3. Year-end market price of Liu common stock is $11.25 per share. 4. Sold all 6,000 common shares of Liu for $66,300. (3) T Noncash Assets = Liabilities + Contributed Capital + Earned Capital Revenue Income Statement Expenses Net Income
Assessing Financial Statement Effects of Marketable Equity Securities Use the financial statement effects template to record the accounts and amounts for the following four transactions involving investments in marketable equity securities. a. Purchased 14,000 common shares of Heller Co. at $16 cash per share. b. Received a cash dividend of $1.25 per common share from Heller. c. Year-end market price of Heller common stock is $17.50 per share. d. Sold all 14,000 common shares of Heller for $220,920 cash. Note: For each account category, indicate the appropriate account name. Enter "N/A" for any account category that is not used for a given transaction. Note: Indicate a decrease in an account category by including a negative sign with the amount. tion N/A N/A N/A N/A Cash Asset (224,000) 17,500 + 220,920 * N/A ◆ * N/A 0 N/A * N/A Noncash Assets 224,000 = = 21,000 * N/A 0✓ = ♦ = N/A * N/A (171,500) * = * N/A Balance Sheet Liabilities 0 0✔ 0 0 4 + > N/A N/A N/A N/A Contrib. Capital 0 0✔ 0…