Advanced Financial Accounting
12th Edition
ISBN: 9781259916977
Author: Christensen, Theodore E., COTTRELL, David M., Budd, Cassy
Publisher: Mcgraw-hill Education,
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Chapter 2, Problem 2.4E
a.
To determine
Concept introduction
In the organization, there are two important methods to calculate one’s accounts. The equity method is used when the investor has acquired more reliable resources and gains profit shares by owning
To calculate: The equity and the fair value method.
b.
To determine
Introduction In the organization, there are two important methods to calculate one’s accounts. The equity method is used when the investor has acquired more reliable resources and gains profit shares by owning
To calculate: The equity and the fair value method.
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On January 2, Matthews Corporation acquired 20% of the outstanding common stock of Dennehy Company for $450,000. For the
year ended December 31, Dennehy reported net income of $90,000 and paid cash dividends of $30,000 on its common stock. On
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Gant Company purchased 30 percent of the outstanding shares of Temp Company for $87,000 on January 1, 20X6. The following
results are reported for Temp Company:
Net income
Dividends paid
Fair value of shares held by Gant:
January 1
December 31
a. Carries the investment at fair value.
b. Uses the equity method.
20X6
$ 43,000
14,000
Income from investment
Balance in investment
S
$
87,000
106,000
Required:
Determine the amounts reported by Gant as income from its investment in Temp for each year and the balance in Gant's investment in
Temp at the end of each year assuming that Gant uses the following options in accounting for its investment in Temp:
Complete this question by entering your answers in the tabs below.
20X7
$ 38,000
28,000
20X6
106,000
103,000
20X7
(800) $ 39,400
95,700 $ 109,000
Answer is complete but not entirely correct.
Required A Required B
Determine the amounts reported by Gant as income from its investment in Temp for each year and the balance in Gant's
investment in…
Assessing Financial Statement Effects Investments
On January 1, Ball Corporation purchased shares of Leftwich Company common stock.
(a) Assume that the stock acquired by Ball represents 15% of Leftwich's voting stock and that Ball has no influence over Leftwich's business decisions. Use the financial statement effects template to record the following transactions:
(1) Ball purchased 10,000 common shares of Leftwich at $15 cash per share.
(2) Leftwich reported annual net income of $40,000.
(3) Ball received a cash dividend of $1.20 per common share from Leftwich.
(4) Year-end market price of Leftwich common stock is $19 per share.
Use negative signs with your answers, when appropriate.
Transaction Cash Asset +
(1)
(2)
(3)
(4)
Transaction Cash Asset +
Balance Sheet
Noncash
Assets = Liabilities +
(1)
(2)
(3)
(1) Ball purchased 10,000 common shares of Leftwich at $15 cash per share.
(2) Leftwich reported annual net income of $40,000.
(3) Ball received a cash dividend of $1.20 per common…
Chapter 2 Solutions
Advanced Financial Accounting
Ch. 2 - What types of investments in common stock normally...Ch. 2 - Prob. 2.2QCh. 2 - Describe an investor’s treatment of an investment...Ch. 2 - How is the receipt of a dividend recorded under...Ch. 2 - How does carrying securities at fair value...Ch. 2 - Prob. 2.6QCh. 2 - Prob. 2.7QCh. 2 - Prob. 2.8QCh. 2 - Prob. 2.9QCh. 2 - Prob. 2.10Q
Ch. 2 - How are a subsidiary’s dividend declarations...Ch. 2 - Prob. 2.12QCh. 2 - Give a definition of consolidated retained...Ch. 2 - Prob. 2.14QCh. 2 - Prob. 2.15QCh. 2 - Prob. 2.16AQCh. 2 - When is equity method reporting considered...Ch. 2 - How does the fully adjusted equity method differ...Ch. 2 - What is the modified equity method? When might a...Ch. 2 - Choice of Accounting Method Slanted Building...Ch. 2 - Prob. 2.2CCh. 2 - Prob. 2.3CCh. 2 - Prob. 2.4CCh. 2 - Prob. 2.5CCh. 2 - Prob. 2.6CCh. 2 - Prob. 2.1.1ECh. 2 - Multiple-Choice Questions on Accounting for Equity...Ch. 2 - Prob. 2.1.3ECh. 2 - Prob. 2.1.4ECh. 2 - Multiple-Choice Questions on Intercorporate...Ch. 2 - Prob. 2.2.2ECh. 2 - Prob. 2.3.1ECh. 2 - Prob. 2.3.2ECh. 2 - Prob. 2.3.3ECh. 2 - Prob. 2.4ECh. 2 - Acquisition Price Phillips Company bought 40...Ch. 2 - Prob. 2.6ECh. 2 - Prob. 2.7ECh. 2 - Carrying an investment at Fair Value versus Equity...Ch. 2 - Carrying an Investment at Fair Value versus Equity...Ch. 2 - Prob. 2.10ECh. 2 - Prob. 2.11ECh. 2 - Prob. 2.12ECh. 2 - Prob. 2.13ECh. 2 - Income Reporting Grandview Company purchased 40...Ch. 2 - Investee with Preferred Stock Outstanding Reden...Ch. 2 - Prob. 2.16AECh. 2 - Prob. 2.17AECh. 2 - Changes ¡n the Number of Shares Held Idle...Ch. 2 - Investments Carried at Fair Value and Equity...Ch. 2 - Carried at Fair Value Journal Entries Marlow...Ch. 2 - Consolidated Worksheet at End of the First Year of...Ch. 2 - Consolidated Worksheet at End of the Second Year...Ch. 2 - Prob. 2.23PCh. 2 - Prob. 2.24PCh. 2 - Prob. 2.25APCh. 2 - Equity-Method income Statement Wealthy...Ch. 2 - Prob. 2.27BPCh. 2 - Prob. 2.28BP
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