Intermediate Accounting
3rd Edition
ISBN: 9780136912644
Author: Elizabeth A. Gordon; Jana S. Raedy; Alexander J. Sannella
Publisher: Pearson Education (US)
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Textbook Question
Chapter 16, Problem 16.4P
Equity Investments, Readily Determinable Fair Value. DeNault Aircraft Corporation acquired the following equity investments at the beginning of Year 1 to be held in a portfolio. DeNault does not have significant influence over the investees.
| Description | Revere Group | Belton Brothers | Yan-Co Associates | Lopes Company |
| Number of shares | 100,100 | 98,000 | 45,000 | 69,500 |
| Market price per share | × $23 | × $11 | × $16 | × $68 |
| Share acquisition price | $2,302,300 | $1,078,000 | $720,000 | $4,726,000 |
Share prices at the end of Years 1 and 2 follow.
| Fair Value | Revere Group | Belton Brothers | Yan-Co Associates |
Lopes Company |
| End of Year 1 | $26 | $9 | $21 | $59 |
| End of Year 2 | $18 | $6 | $25 | $51 |
Required
- a. Prepare the
journal entry to record the acquisition of the investments. - b. Prepare the journal entry to record the end of Year 1 fair value adjustment for the portfolio.
- c. Assume that DeNault sells 35,000 Yan-Co shares for $23 per share at the beginning of Year 2. Prepare the journal entry required to record the sale. DeNault does not adjust the fair value adjustment account at this time.
- d. Prepare the journal entry to record the Year 2 fair value adjustment.
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Armadillo Enterprises acquired the following equity investmentsat the beginning of year 1 as trading investments.
Description
Number of shares
Market price per share
Total price
Finestra Company
15,000
x $25
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X$18
$360,000
Market values at theend of Years 1 &2 are presented
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$23
BVD Company
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REQUIREMENTS:
Prepare the journal entry to record the acquisition of
theinvestments.
Prepare the adjusting journal entry required at the end of year1.
Armadillo Enterprises sells 15,000 shares of BVD Company for $16at the beginning of year 2. Prepare the journal entry to record thesale.
Prepare the adjusting journal entry required at the end of year2.
Assume that ArmadilloEnterprises now holds these investments asavailable-for-sale.
Prepare the journal entry to record the acquisition of theinvestments.
Prepare the adjusting journal entry required at the end of year1.
Armadillo Enterprises…
How much is the unrealized gain (loss) accumulated in equity as of December 31,
20x2?
Karen Co. purchased the following equity securities on January 1, 20x1 for a total amount of
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Alaska Co. preference shares
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160,000
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Totals
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Alaska Co. preference shares
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60,000
Valdez Co. ordinary shares
Total
P300,000
On December 31, 20x2, the portfolio of Karen Co. comprised the following:
Fair value - 12/31/x2
Alaska Co. preference shares
P220,000
180,000
Valdez Co. ordinary shares
Total
P400,000
On February 2, 20x3, all of the Alaska Co. preference shares were sold for P160,000 net of transaction
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0
100,000
40,000
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Chapter 16 Solutions
Intermediate Accounting
Ch. 16 - Prob. 16.1QCh. 16 - Is reporting an investment at its cost considered...Ch. 16 - Prob. 16.3QCh. 16 - Prob. 16.4QCh. 16 - Prob. 16.5QCh. 16 - Prob. 16.6QCh. 16 - What categories can managers use to classify...Ch. 16 - When is the equity method of accounting for...Ch. 16 - Prob. 16.9QCh. 16 - Can companies apply the fair value option to all...
Ch. 16 - What is the fair value hierarchy for investment...Ch. 16 - Prob. 16.12QCh. 16 - Prob. 16.13QCh. 16 - Prob. 16.14QCh. 16 - Prob. 16.15QCh. 16 - Prob. 16.16QCh. 16 - Prob. 16.17QCh. 16 - Deutsch Imports has three securities in its...Ch. 16 - Prob. 16.2MCCh. 16 - Prob. 16.3MCCh. 16 - Prob. 16.4MCCh. 16 - Prob. 16.5MCCh. 16 - Prob. 16.6MCCh. 16 - Prob. 16.7MCCh. 16 - Prob. 16.1BECh. 16 - Prob. 16.2BECh. 16 - Debt Investments, Trading. Using the information...Ch. 16 - Prob. 16.4BECh. 16 - Prob. 16.5BECh. 16 - Prob. 16.6BECh. 16 - Prob. 16.7BECh. 16 - Prob. 16.8BECh. 16 - Prob. 16.9BECh. 16 - Prob. 16.10BECh. 16 - Prob. 16.11BECh. 16 - Prob. 16.12BECh. 16 - Prob. 16.13BECh. 16 - Notes Receivable. Aaron Anatole accepted a...Ch. 16 - Prob. 16.15BECh. 16 - Prob. 16.16BECh. 16 - Prob. 16.17BECh. 16 - Debt Investments. Impairments. IFRS. For each debt...Ch. 16 - Prob. 16.19BECh. 16 - Prob. 16.1ECh. 16 - Prob. 16.2ECh. 16 - Prob. 16.3ECh. 16 - Prob. 16.4ECh. 16 - Prob. 16.5ECh. 16 - Prob. 16.6ECh. 16 - Prob. 16.7ECh. 16 - Debt and Equity Investments, Available-for-Sale...Ch. 16 - Prob. 16.9ECh. 16 - Equity Investments without a Readily Determinable...Ch. 16 - Prob. 16.11ECh. 16 - Prob. 16.12ECh. 16 - Prob. 16.13ECh. 16 - Equity-Investments, Equity Method. Book Value of...Ch. 16 - Prob. 16.15ECh. 16 - Prob. 16.16ECh. 16 - Notes Receivable. Each of the following three...Ch. 16 - Prob. 16.18ECh. 16 - Prob. 16.19ECh. 16 - Prob. 16.20ECh. 16 - Prob. 16.21ECh. 16 - Prob. 16.22ECh. 16 - Prob. 16.23ECh. 16 - Prob. 16.24ECh. 16 - Prob. 16.25ECh. 16 - Prob. 16.1PCh. 16 - Debt Investments, Trading. Freder Software Group...Ch. 16 - Prob. 16.3PCh. 16 - Equity Investments, Readily Determinable Fair...Ch. 16 - Prob. 16.5PCh. 16 - Prob. 16.6PCh. 16 - Prob. 16.7PCh. 16 - Prob. 16.8PCh. 16 - Prob. 16.9PCh. 16 - Prob. 16.10PCh. 16 - Prob. 16.11PCh. 16 - Equity Investments, Equity Method, Fair Value...Ch. 16 - Prob. 16.13PCh. 16 - Prob. 16.14PCh. 16 - Prob. 16.15PCh. 16 - Prob. 16.16PCh. 16 - Prob. 16.17PCh. 16 - Prob. 16.18PCh. 16 - Prob. 16.19PCh. 16 - Prob. 1JCCh. 16 - Prob. 2JCCh. 16 - Prob. 1SSCCh. 16 - Prob. 1BCCCh. 16 - Prob. 2BCC
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