FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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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 $12 cash per share.
(2) Leftwich reported annual net income of $70,000.
(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 answers, when appropriate.
Balance Sheet
Transaction Cash Asset +
(1)
(2)
(3)
(4)
Noncash
Assets = Liabilities
Transaction Cash Asset +
(1) Ball purchased 10,000 common shares of Leftwich at $12 cash per share.
(2) Leftwich reported annual net income of $70,000.
(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 answers, when appropriate.
Balance Sheet
(1)
(2)
(3)
Contributed Earned
Capital + Capital
Noncash
Assets
(b) Assume that the stock acquired by Ball represents 30% of Leftwich's voting stock and that Ball accounts for this investment using the equity method since it is able to exert significant influence. Use the financial statement effects template to record the following
transactions:
- Liabilities +
Revenue
Contributed Earned
Capital + Capital
Income Statement
Revenue
Expenses =
Net
Income
Income Statement
Net
Expenses Income
↑
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Transcribed Image Text: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 $12 cash per share. (2) Leftwich reported annual net income of $70,000. (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 answers, when appropriate. Balance Sheet Transaction Cash Asset + (1) (2) (3) (4) Noncash Assets = Liabilities Transaction Cash Asset + (1) Ball purchased 10,000 common shares of Leftwich at $12 cash per share. (2) Leftwich reported annual net income of $70,000. (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 answers, when appropriate. Balance Sheet (1) (2) (3) Contributed Earned Capital + Capital Noncash Assets (b) Assume that the stock acquired by Ball represents 30% of Leftwich's voting stock and that Ball accounts for this investment using the equity method since it is able to exert significant influence. Use the financial statement effects template to record the following transactions: - Liabilities + Revenue Contributed Earned Capital + Capital Income Statement Revenue Expenses = Net Income Income Statement Net Expenses Income ↑
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