Financial & Managerial Accounting
13th Edition
ISBN: 9781285866307
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Question
Chapter 13, Problem 3BPE
To determine
Equity investments: Equity investments are stock instruments which claim ownership in the investee company and pay a dividend revenue to the investor company.
Equity method: Equity method is the method used for accounting equity investments which claim a significant influence of above 20% but less than 50% in the outstanding stock of the investee company.
Debit and credit rules:
- Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in
stockholders’ equity accounts. - Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.
To journalize: The stock investment transactions for Company Y, under the equity method
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Equity Method
On January 2, Yorkshire Company acquired 32% of the outstanding stock of Fain Company for $380,000. For the year ended December 31, Fain Company earned income of $99,000 and paid dividends of $30,000.
Prepare the entries for Yorkshire Company for the purchase of the stock, the share of Fain income, and the dividends received from Fain Company.
Jan. 2 - Purchase
Dec. 31 - Income
Dec. 31 - Dividends
Equity MethodOn January 2, Yorkshire Company acquired 28% of the outstanding stock of Fain Company for $290,000. For the year ended December 31, Fain Company earned income of $75,000 and paid dividends of $23,000.Prepare the entries for Yorkshire Company for the purchase of the stock, the share of Fain income, and the dividends received from Fain Company.Jan. 2 - Purchase
Dec. 31 - Income
Dec. 31 - Dividends
Accounting for equity investments
On January 6, 20Y8, Bulldog Co. purchased 34% of the outstanding common stock of Gator Co. for $225,000.
Gator Co. paid total dividends of $20,000 to all shareholders on June 30, 20Y8. Gator had a net loss of $55,000
for 20Y8.
a. Journalize Bulldog's purchase of the stock, receipt of the dividends, and the adjusting entry for the equity loss
in Gator Co. stock. If an amount box does not require an entry, leave it blank.
20Y8 Jan. 6
20Y8 June 30
20Y8 Dec. 31
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Chapter 13 Solutions
Financial & Managerial Accounting
Ch. 13 - Prob. 1DQCh. 13 - What causes a gain or loss on the sale of a bond...Ch. 13 - Prob. 3DQCh. 13 - Prob. 4DQCh. 13 - Prob. 5DQCh. 13 - Prob. 6DQCh. 13 - Prob. 7DQCh. 13 - Prob. 8DQCh. 13 - What are the factors contributing to the trend...Ch. 13 - Prob. 10DQ
Ch. 13 - Prob. 1APECh. 13 - Bond investment transactions Journalize the...Ch. 13 - Prob. 2APECh. 13 - Stock investment transactions On September 12,...Ch. 13 - Prob. 3APECh. 13 - Prob. 3BPECh. 13 - Prob. 4APECh. 13 - Prob. 4BPECh. 13 - Prob. 5APECh. 13 - Prob. 5BPECh. 13 - Prob. 6APECh. 13 - Prob. 6BPECh. 13 - Prob. 1EXCh. 13 - Prob. 2EXCh. 13 - Prob. 3EXCh. 13 - Prob. 4EXCh. 13 - Prob. 5EXCh. 13 - Entries for investment in stock, receipt of...Ch. 13 - Prob. 7EXCh. 13 - Prob. 8EXCh. 13 - Entries for stock investments, dividends, and sale...Ch. 13 - Prob. 10EXCh. 13 - Prob. 11EXCh. 13 - Prob. 12EXCh. 13 - Prob. 13EXCh. 13 - Prob. 14EXCh. 13 - Prob. 15EXCh. 13 - Prob. 16EXCh. 13 - Fair value journal entries, trading investments...Ch. 13 - Prob. 18EXCh. 13 - Prob. 19EXCh. 13 - Prob. 20EXCh. 13 - Prob. 21EXCh. 13 - Prob. 22EXCh. 13 - Prob. 23EXCh. 13 - Prob. 24EXCh. 13 - Prob. 25EXCh. 13 - Prob. 26EXCh. 13 - Prob. 27EXCh. 13 - Prob. 28EXCh. 13 - Prob. 29EXCh. 13 - Debt investment transactions, available-for-sale...Ch. 13 - Prob. 2APRCh. 13 - Stock investment transactions, equity method and...Ch. 13 - Prob. 4APRCh. 13 - Prob. 1BPRCh. 13 - Prob. 2BPRCh. 13 - Stock investment transactions, equity method and...Ch. 13 - Prob. 4BPRCh. 13 - Selected transactions completed by Equinox...Ch. 13 - Benefits of fair value On July 16, 1998, Wyatt...Ch. 13 - Prob. 2CPCh. 13 - Prob. 3CPCh. 13 - Prob. 4CP
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