ADVANCED FINANCIAL ACCT.(LL) >CUSTOM<
12th Edition
ISBN: 9781260824292
Author: Christensen
Publisher: MCGRAW-HILL HIGHER EDUCATION
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 2, Problem 2.7E
To determine
Concept Introduction:
The carrying value of invetsment is the original purachse price of investmnet adjusted by addition of any net income and deduction of any dividend declaration.
To Compute: The amount that P Company report as carrying value of investment at December
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Jameson Company acquired 90% interest in Southwest Company on December 31, 20x4 for P320,000. During 20x5 Southwest had a net income of P22,000 and paid a cash dividend of P7,000. the cost method is applied that means it would give a debit balance in the Investment in Southwest Company account at the end of 20x5 of:
North Ltd acquired $100,000 of shares in South Ltd for trading purposes on 1 January
20X3. Transaction costs of $2,000 were incurred. The fair value of the shares at 31
December 20X3 was $120, 500. Choose the account names and calculate the amount
that correctly account for this investment on 31 December 20X3 (amount for the credit
entry is not required).
PQR Ltd. purchased
assets of $ 6,80,000 and took over liabilites of $ 45,000 at an agreed value of $6,30,000
from ABC Ltd. PQR Ltd. issued 12% debentures of $ 100 each at discount of 10% is full
satisfaction of the purchase price.
Pass journal entries in the books of PQR Ltd.
Chapter 2 Solutions
ADVANCED FINANCIAL ACCT.(LL) >CUSTOM<
Ch. 2 - What types of investments in common stock normally...Ch. 2 - Prob. 2.2QCh. 2 - Describe an investor’s treatment of an investment...Ch. 2 - How is the receipt of a dividend recorded under...Ch. 2 - How does carrying securities at fair value...Ch. 2 - Prob. 2.6QCh. 2 - Prob. 2.7QCh. 2 - Prob. 2.8QCh. 2 - Prob. 2.9QCh. 2 - Prob. 2.10Q
Ch. 2 - How are a subsidiary’s dividend declarations...Ch. 2 - Prob. 2.12QCh. 2 - Give a definition of consolidated retained...Ch. 2 - Prob. 2.14QCh. 2 - Prob. 2.15QCh. 2 - Prob. 2.16AQCh. 2 - When is equity method reporting considered...Ch. 2 - How does the fully adjusted equity method differ...Ch. 2 - What is the modified equity method? When might a...Ch. 2 - Choice of Accounting Method Slanted Building...Ch. 2 - Prob. 2.2CCh. 2 - Prob. 2.3CCh. 2 - Prob. 2.4CCh. 2 - Prob. 2.5CCh. 2 - Prob. 2.6CCh. 2 - Prob. 2.1.1ECh. 2 - Multiple-Choice Questions on Accounting for Equity...Ch. 2 - Prob. 2.1.3ECh. 2 - Prob. 2.1.4ECh. 2 - Multiple-Choice Questions on Intercorporate...Ch. 2 - Prob. 2.2.2ECh. 2 - Prob. 2.3.1ECh. 2 - Prob. 2.3.2ECh. 2 - Prob. 2.3.3ECh. 2 - Prob. 2.4ECh. 2 - Acquisition Price Phillips Company bought 40...Ch. 2 - Prob. 2.6ECh. 2 - Prob. 2.7ECh. 2 - Carrying an investment at Fair Value versus Equity...Ch. 2 - Carrying an Investment at Fair Value versus Equity...Ch. 2 - Prob. 2.10ECh. 2 - Prob. 2.11ECh. 2 - Prob. 2.12ECh. 2 - Prob. 2.13ECh. 2 - Income Reporting Grandview Company purchased 40...Ch. 2 - Investee with Preferred Stock Outstanding Reden...Ch. 2 - Prob. 2.16AECh. 2 - Prob. 2.17AECh. 2 - Changes ¡n the Number of Shares Held Idle...Ch. 2 - Investments Carried at Fair Value and Equity...Ch. 2 - Carried at Fair Value Journal Entries Marlow...Ch. 2 - Consolidated Worksheet at End of the First Year of...Ch. 2 - Consolidated Worksheet at End of the Second Year...Ch. 2 - Prob. 2.23PCh. 2 - Prob. 2.24PCh. 2 - Prob. 2.25APCh. 2 - Equity-Method income Statement Wealthy...Ch. 2 - Prob. 2.27BPCh. 2 - Prob. 2.28BP
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Palm Corporation and Staple Company have announced terms of an exchange agreement under which Palm will issue 9,000 shares of its $11 par value common stock to acquire all of Staple Company's assets. Palm shares currently are trading at $55, and Staple $6 par value shares are trading at $19 each. Historical cost and fair value balance sheet data on January 1, 20X2, are as follows: Balance Sheet Item Assets Cash and Receivables Land Buildings and Equipment (net) Total Assets Equities Common Stock Additional Paid-In Capital Retained Earnings Total Equities Palm Corporation Book Value a. Common Stock b. Cash and Receivables c. Land d. Buildings and Equipment (net) e. Goodwill f. Additional paid-In Capital g. Retained Earnings $ 158,000 117,000 307,000 $ 582,000 $ 197,000 18,000 367,000 $ 582,000 Fair Value Amounts $ 158,000 184,000 419,000 $ 761,000 Staple Company Book Value $ 60,000 65,000 163,000 $ 288,000 $ 93,000 8,300 186,700 $ 288,000 Fair Value Required: What amount will be…arrow_forwardAt 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?arrow_forwardO’Brien Industries Inc. is a book publisher. The partial balance sheets for December 31, 20Y4 and 20Y5 are as follows: The available-for-sale investments at cost and fair value on December 31, 20Y4, are as follows: The investment in Jolly Roger Co. stock represents 30% of the outstanding shares of Jolly Roger Co. The following selected transactions occurred during 20Y5: Jan. 2. Purchased $94,400 of Gozar Inc. 5%, 10-year bonds at 100. The bonds are classified as an available-for-sale investment. The bonds pay interest on June 30 and December 31. June 30. Received interest for 6 months on the Gozar Inc. bonds purchased on January 2. Oct. 1. Purchased $40,000 of Nightline Co. 6%, 10-year bonds at 100. The bonds are classified as an available-for-sale investment. The bonds pay interest on October 1 and April 1. 9. Dividends of $12,500 are received on the Jolly Roger Co. investment. Dec. 31. Jolly Roger Co. reported a total net income of $112,000 for…arrow_forward
- The AB Ltd. took over the Assets of 8,00,000 and Liabilities of $ 70,000 of S Ltd. for the purchase consideration of $7,70,000. The AB Ltd. paid the purchase consideration by issuing 8% Debentures of $100 each at 10% premium. Draft the journal entries in the books of AB Ltd.arrow_forwardInstructions At a total cost of $6,950,000, Herrera Corporation acquired 229,500 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 850,000 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 $974,000 for the current period. 2. A cash dividend of $0.28 per common share is paid by Tran Corp. during the current period. B. Why is the equity method appropriate for the Tran Corp. investment?arrow_forwardFairbanks Corporation purchased 400 ordinary shares of Sherman Inc. as a trading investment for E13,200. During the year, Sherman paid a cash dividend of £3.25 per share. At year-end, Sherman shares were selling for £34.50 per share. How much total revenues (all revenues) should be recognized from this investment during the year? Select one: Oa. $1900 Ob. $700 OC $1300 Od. $600arrow_forward
- Assume that the acquisition was completed in 5 months (150 days). Assume further that Siegel purchased 300,000 shares of AXYS at an average cost of $4.15, and shorted 29,800 shares of Celera. Siegel funded 70% of his purchase with debt. Celera's share price on the closing date was $27.43. Assuming a borrowing cost of 8%, calculate the return on Siegel's investment for the holding period and on an annualized basis.arrow_forwardUse the following information for Problems 17 through 21:On January 1, Park Corporation and Strand Corporation had condensed balance sheets as follows:On January 2, Park borrowed $60,000 and used the proceeds to obtain 80 percent of the outstanding common shares of Strand. The acquisition price was considered proportionate to Strand’s total fair value. The $60,000 debt is payable in 10 equal annual principal payments, plus interest, beginning December 31. The excess fair value of the investment over the underlying book value of the acquired net assets is allocated to inventory (60 percent) and to goodwill (40 percent). On a consolidated balance sheet as of January 2, what should be the amount for each of the following?Stockholders’ equity:a. $80,000b. $90,000c. $95,000d. $130,000arrow_forwardUse the following information for Problems 17 through 21:On January 1, Park Corporation and Strand Corporation had condensed balance sheets as follows:On January 2, Park borrowed $60,000 and used the proceeds to obtain 80 percent of the outstanding common shares of Strand. The acquisition price was considered proportionate to Strand’s total fair value. The $60,000 debt is payable in 10 equal annual principal payments, plus interest, beginning December 31. The excess fair value of the investment over the underlying book value of the acquired net assets is allocated to inventory (60 percent) and to goodwill (40 percent). On a consolidated balance sheet as of January 2, what should be the amount for each of the following?Noncurrent assets:a. $130,000b. $134,000c. $138,000d. $140,000arrow_forward
- Use the following information for Problems 17 through 21:On January 1, Park Corporation and Strand Corporation had condensed balance sheets as follows:On January 2, Park borrowed $60,000 and used the proceeds to obtain 80 percent of the outstanding common shares of Strand. The acquisition price was considered proportionate to Strand’s total fair value. The $60,000 debt is payable in 10 equal annual principal payments, plus interest, beginning December 31. The excess fair value of the investment over the underlying book value of the acquired net assets is allocated to inventory (60 percent) and to goodwill (40 percent). On a consolidated balance sheet as of January 2, what should be the amount for each of the following?Current assets:a. $105,000b. $102,000c. $100,000d. $90,000arrow_forwardUse the following information for Problems 17 through 21:On January 1, Park Corporation and Strand Corporation had condensed balance sheets as follows:On January 2, Park borrowed $60,000 and used the proceeds to obtain 80 percent of the outstanding common shares of Strand. The acquisition price was considered proportionate to Strand’s total fair value. The $60,000 debt is payable in 10 equal annual principal payments, plus interest, beginning December 31. The excess fair value of the investment over the underlying book value of the acquired net assets is allocated to inventory (60 percent) and to goodwill (40 percent). On a consolidated balance sheet as of January 2, what should be the amount for each of the following?Noncurrent liabilities:a. $110,000b. $104,000c. $90,000d. $50,000arrow_forwardHow much is the investment income to be reported at the end of the current year? At the beginning of current year, Courage Company acquired 25% of the outstanding shares of an investee at a total cost of P8,400, 000. At the time, the carrying amount of the net assets of Courage Company totaled P28, 800, 000. The investee owned equipment with 5-year remaining life and with a fair value P2, 400, 000 more than carrying amount. The investee owned land with a fair value of Pl, 200, 000 more than carrying amount. During the current year, the investee sold the land. At year-end, the investee reported net income of P6, 000, 000 declared and paid a cash dividend of P3, 600, 000 to shareholders at year-end. The fair value of the investment at year-end is P9, 000, 000. Q1. How much is the investment income to be reported at the end of the current year? Q2. How much is the carrying amount of the investment at year- end? Q3. How much is the implied goodwill from acquisition? Q4. What is the entry…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning