Advanced Accounting
14th Edition
ISBN: 9781260247824
Author: Joe Ben Hoyle, Thomas F. Schaefer, Timothy S. Doupnik
Publisher: RENT MCG
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Chapter 1, Problem 26P
a.
To determine
Introduction: The equity method of accounting is a method where the investment is recognized at cost initially and thereafter accounted for based on the change in the investor’s share in investee net assets. The share in the investee’s profit or loss is included in the investor's profit or loss. Fair value method initial investment is recorded at cost and then adjusted with fair value.
To determine: 1. The amount of equity income A reports for 2021 and
2. The amount of investment in Z account of A’s December 31, 2021 balance sheet.
b.
To determine
Introduction: The equity method of accounting is a method where the investment is recognized at cost initially and thereafter accounted for based on the change in the investor’s share in investee net assets. The share in the investee’s profit or loss is included in the investor's profit or loss. Fair value method initial investment is recorded at cost and then adjusted with fair value.
To determine: 1. The amount of income from investment in Z reported by A in 2021 and
2. The balance of investment reported in the balance sheet for 2021.
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On December 31, 2019, Akron, Inc., purchased 5 percent of Zip Company's common shares on the open market in exchange for $15,600. On December 31, 2020, Akron, Inc., acquires an additional 25 percent of Zip Company's outstanding common stock for $97,000.
During the next two years, the following information is available for Zip Company:
Income
Dividends Declared
Common StockFair Value (12/31)
2019
$312,000
2020
$85,000
$7,900
388,000
2021
94,000
16,000
487,000
At December 31, 2020, Zip reports a net book value of $298,000. Akron attributed any excess of its 30 percent share of Zip's fair over book value to its share of Zip's franchise agreements. The franchise agreements had a remaining life of 10 years at December 31, 2020.
Assume Akron applies the equity method to its Investment in Zip account:
What amount of equity income should Akron report for 2021?
On Akron’s December 31, 2021, balance sheet, what amount is reported for the Investment in Zip account?
On December 31, 2019, Akron, Inc., purchased 5 percent of Zip Company's common shares on the open market in exchange for $15,650. On December 31, 2020, Akron, Inc., acquires an additional 25 percent of Zip Company's outstanding common stock for $93,500.
During the next two years, the following information is available for Zip Company:
Income
Dividends Declared
Common StockFair Value (12/31)
2019
$313,000
2020
$70,000
$7,800
374,000
2021
90,000
15,100
476,000
At December 31, 2020, Zip reports a net book value of $294,000. Akron attributed any excess of its 30 percent share of Zip's fair over book value to its share of Zip's franchise agreements. The franchise agreements had a remaining life of 10 years at December 31, 2020.
Assume Akron applies the equity method to its Investment in Zip account:
What amount of equity income should Akron report for 2021?
On Akron’s December 31, 2021, balance sheet, what amount is reported for the Investment in Zip…
On December 31, 2019, Akron, Inc., purchased 5 percent of Zip Company's common shares on the open market in exchange for $14,400. On December 31, 2020, Akron, Inc., acquires an additional 25 percent of Zip Company's outstanding common stock for $93,000.
During the next two years, the following information is available for Zip Company:
Income
Dividends Declared
Common StockFair Value (12/31)
2019
$321,000
2020
$76,000
$7,800
372,000
2021
81,000
15,000
489,000
At December 31, 2020, Zip reports a net book value of $298,000. Akron attributed any excess of its 30 percent share of Zip's fair over book value to its share of Zip's franchise agreements. The franchise agreements had a remaining life of 10 years at December 31, 2020.
Assume Akron uses fair-value accounting for its Investment in Zip account:
What amount of income from its investment in Zip should Akron report for 2021?
On Akron’s December 31, 2021, balance sheet, what amount is reported for the…
Chapter 1 Solutions
Advanced Accounting
Ch. 1 - What advantages does a company achieve when it...Ch. 1 - A company acquires a rather large investment in...Ch. 1 - What accounting treatments are appropriate for...Ch. 1 - Prob. 4QCh. 1 - Why does the equity method record dividends from...Ch. 1 - Prob. 6QCh. 1 - Smith. Inc., has maintained an ownership interest...Ch. 1 - Prob. 8QCh. 1 - Because of the acquisition of additional investee...Ch. 1 - Prob. 10Q
Ch. 1 - Prob. 11QCh. 1 - Prob. 12QCh. 1 - In a stock acquisition accounted for by the equity...Ch. 1 - Prob. 14QCh. 1 - What is the difference between downstream and...Ch. 1 - Prob. 16QCh. 1 - Prob. 17QCh. 1 - What is the fair-value option for reporting equity...Ch. 1 - When an investor uses the equity method to account...Ch. 1 - Prob. 2PCh. 1 - Prob. 3PCh. 1 - Under fair-value accounting for an equity...Ch. 1 - When an equity method investment account is...Ch. 1 - Prob. 6PCh. 1 - Prob. 7PCh. 1 - Prob. 8PCh. 1 - Evan Company reports net income of $140,000 each...Ch. 1 - Prob. 10PCh. 1 - Prob. 11PCh. 1 - Prob. 12PCh. 1 - Prob. 13PCh. 1 - Prob. 14PCh. 1 - Prob. 15PCh. 1 - Prob. 16PCh. 1 - Prob. 17PCh. 1 - Prob. 18PCh. 1 - Prob. 19PCh. 1 - Prob. 20PCh. 1 - Prob. 21PCh. 1 - Prob. 23PCh. 1 - Matthew, Inc., owns 30 percent of the outstanding...Ch. 1 - Prob. 26PCh. 1 - Prob. 28PCh. 1 - Prob. 29PCh. 1 - Prob. 30PCh. 1 - Prob. 31P
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