Loose Leaf for Financial Accounting: Information for Decisions
9th Edition
ISBN: 9781260158762
Author: John J Wild
Publisher: McGraw-Hill Education
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Chapter C, Problem 12QS
Summary Introduction
Concept Introduction:
Equity method of investment is applied when the investor has a significant influence over the investee. The significant influence is expected if the investor holds 20% to 50% investment in the investee company. Under the equity method, the investment value is updated with the share in the net income of the investee.
To prepare:the
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As of the beginning of the year, Devers, Inc. acquired common stock of Verdugo Limited at book value. During the current year, Verdugo earned $12.5 million and declared dividends of $4 million.
Indicate the amount shown for Investment in Verdugo on Devers Inc.’s balance sheet on December 31 and the amount of total income Devers would report on the income statement for the year related to its investment under the assumption that Devers did the following:
A. Paid $2 million for a 10-percent interest in Verdugo and classifies the investment as a passive investment. The fair value of the investment at December 31st was now $2.3 million.
B. Paid $7 million for a 35-percent interest in Verdugo and uses the equity method. The fair value of the investment at December 31st was now $7.3 million.
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Aylmer Corp has the following transactions relating to investments.
Aylmer Corp has a December 31 year end.
01-Sep-19 Aylmer Corp purchased 3,100 shares of Belmont Inc at $13.00 per share.
31-Oct-19 Belmont Inc paid dividends of $5.00 per share.
31-Dec-19 Belmont Inc shares had a fair value of $12.00 per share.
31-Dec-19 Belmont Inc reported net income of $63,000 for the year.
01-Mar-20 Aylmer Corp sold all of Belmont Inc shares for $17.00 per share.
Additional Information:
Assume Aylmer Corp uses the fair value through other comprehensive income (FV-OCI) method to account for its investments.
Dividend income is required to be recorded in a separate account.
REQUIRED:
Prepare the appropriate entries for the above transactions.
Carla, Inc. purchased 1,810 shares of Oneida Corporation common stock for $84,600. During the year. Oneida paid a cash dividend of
$1.10 per share. At year-end, Oneida stock was selling for $43.90 per share. Prepare Carla's journal entries to record (a) the purchase
of the investment, (b) the dividends received, and (c) the fair value adjustment. (Assume a zero balance in the Fair Value Adjustment
account.) (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No
Entry" for the account titles and enter O for the amounts.)
(a)
(b)
(c)
Account Titles and Explanation
Debit
Credit
Chapter C Solutions
Loose Leaf for Financial Accounting: Information for Decisions
Ch. C - Under what two conditions should investments be...Ch. C - Prob. 2DQCh. C - Prob. 3DQCh. C - Identify the three classes of debt investments and...Ch. C - Prob. 5DQCh. C - Prob. 6DQCh. C - Prob. 7DQCh. C - Prob. 8DQCh. C - Prob. 9DQCh. C - Prob. 10DQ
Ch. C - Prob. 11DQCh. C - Prob. 12DQCh. C - Prob. 13DQCh. C - Prob. 14DQCh. C - Which of the following statements a through g are...Ch. C - Prob. 2QSCh. C - Prob. 3QSCh. C - Prob. 4QSCh. C - Prob. 5QSCh. C - Prob. 6QSCh. C - Journ Co. purchased short-term investments in...Ch. C - Prob. 8QSCh. C - Prob. 9QSCh. C - Prob. 10QSCh. C - Prob. 11QSCh. C - Prob. 12QSCh. C - Complete the following descriptions by filling in...Ch. C - Complete the following descriptions by filling in...Ch. C - Prob. 15QSCh. C - Prob. 17QSCh. C - Complete the following descriptions by filling in...Ch. C - Prob. 2ECh. C - Prob. 4ECh. C - Prob. 5ECh. C - Prob. 6ECh. C - Prob. 7ECh. C - Use the following information of Prescrip Co. to...Ch. C - Prob. 9ECh. C - Prob. 10ECh. C - Prob. 12ECh. C - Complete the following descriptions by filling in...Ch. C - Prob. 14ECh. C - Prob. 1PSACh. C - Prob. 3PSACh. C - Prob. 4PSACh. C - Prob. 5PSACh. C - Prob. 6PSACh. C - Prob. 1PSBCh. C - Prob. 3PSBCh. C - Prob. 4PSBCh. C - Prob. 5PSBCh. C - Prob. 6PSBCh. C - Prob. CSPCh. C - Prob. 1GLPCh. C - Prob. 2GLPCh. C - Prob. 1FSACh. C - Prob. 2FSACh. C - Prob. 3FSACh. C - Prob. 2BTN
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