ADV. ACCT CONNECT STAND ALONE
ADV. ACCT CONNECT STAND ALONE
13th Edition
ISBN: 9781266295744
Author: Hoyle
Publisher: MCG
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Chapter 1, Problem 11Q
To determine

Explain the way in which Company W account for this loss while applying the equity method.

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Wilson Company acquired 40 percent of Andrews Company at a bargain price because of losses expected to result from Andrews’s failure in marketing several new products. Wilson paid only $100,000, although Andrews’s corresponding book value was much higher. In the first year after acquisition, Andrews lost $300,000. In applying the equity method, how should Wilson account for this loss?
During 20x1, Windy Co. acquired 10,000 shares of Morning Corp. at P50 per share. Windy Co. paid transaction costs of P25,000 on the acquisition. On Dec. 31,20x1, the fair value of the shares declined to P25 per share. Windy Co. assessed that the decline in fair value will persist over a long period of time. What amount of loss should Windy Co. recognize on Dec. 31, 20x1 if the shares were classified as: a. FVPL asset: 250,000 P/L ,  FVOCI asset: 275,000 P/L b. FVPL asset: 250,000 P/L , FVOCI asset: 275,000 OCI c. FVPL asset: 250,000 P/L , FVOCI asset: 25,000 OCI d. FVPL asset: 250,000 P/L , FVOCI asset: 0
The fair value of depreciable assets of Penner Packaging Company exceeds their book value by $12 million. The assets’ average remaining useful life is 10 years. They are being depreciated by the straight-line method. Finest Foods Industries buys 40% of Penner’s common shares. When adjusting investment revenue and the investment by the equity method, how will the situation described affect those two accounts?

Chapter 1 Solutions

ADV. ACCT CONNECT STAND ALONE

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