Financial Accounting
14th Edition
ISBN: 9781305088436
Author: Carl Warren, Jim Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Chapter 15, Problem 10E
(a)
To determine
Journalize the stock investment transactions for Corporation V, under the equity method.
(b)
To determine
Mention the reason as to why equity method is appropriate for Corporation V.
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At a total cost of $6,700,000, Herrera Corporation acquired 238,000 shares of Tran Corp. common stock as a long-term investment. Herrera Corporation uses the equity method of accounting for this investment. Tran Corp. has 700,000 shares of common stock outstanding, including the shares acquired by Herrera Corporation.Required:A. Journalize the entries by Herrera Corporation on December 31 to record the following information (refer to the Chart of Accounts for exact wording of account titles):1. Tran Corp. reports net income of $967,000 for the current period.2. A cash dividend of $0.29 per common share is paid by Tran Corp. during the current period.B. Why is the equity method appropriate for the Tran Corp. investment?
At a total cost of $1,008,000, Herrera Corporation acquired 80,000 shares of Tran Corp. common stock as a long-term investment. Herrera Corporation uses the equity method of accounting for this investment. Tran Corp. has 200,000 shares of common stock outstanding, including the shares acquired by Herrera Corporation.
a. Journalize the entries by Herrera Corporation to record the following information:
At a total cost of $1,251,600, Herrera Corporation acquired 84,000 shares of Tran Corp. common stock as a long-term investment. Tran Corp. has 300,000 shares of common stock outstanding, including the shares acquired by Herrera Corporation.
a. Journalize the entries by Herrera Corporation to record the following information: If an amount box does not require an entry, leave it blank.
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1. Tran Corp. reports net income of $2,250,000 for the current period.
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2. A cash dividend of $1.60 per common share is paid by Tran Corp. during the current period.
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b. Why is the equity method appropriate for the Tran Corp. investment?
An investment amount
of the outstanding common stock of the investee is presumed to represent significant influence. The equity method is…
Chapter 15 Solutions
Financial Accounting
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