Intermediate Accounting (2nd Edition)
2nd Edition
ISBN: 9780134730370
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
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Question
Chapter 16, Problem 16.13P
a.
To determine
To prepare: The
b.
To determine
To prepare: The journal entries to record the sale of investment under the fair value option and equity method.
c.
To determine
To prepare: A schedule to compare the amount and timing of revenue recognition for the fair value option and equity methods.
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Part AClark Company acquired 15% of the 500,000 shares of common stock of Davis Company at a total cost of$25.75 per share on June 1, 2022. On October 1, Davis Company declared and paid a $50,000 cash dividend.On December 31, Davis Company stock had a market price of $27.00 per share and the company reported netincome of $1,250,000 for the year. The securities are classified as available-for-sale.Prepare all journal entries for 2022.
Part BOn January 1, 2023, Evans Company purchased 40% of Farley Corporation’s 800,000 outstanding shares ofcommon stock at a cost of $35 per share. On July 15, Farley declared and paid a cash dividend of $1.50 pershare. On December 31, Farley reported a net income of $2,860,000 for the year and the market price of itscommon stock was $42 per share. Prepare all journal entries for 2023.
I only need part B.
Brankov Company purchased common stock in Ramona Company for
$400,000. In the current year, Ramona Company reported net income of $50,000 and
paid a dividend of $32,000. At the end of the year, the market value of the investment
in Ramona Company was $410,000. A) Assume Brankov Company owns 10% of the
shares of Ramona Company. Brankov Company considers the investment to be
available-for-sale securities. Show the effects of the transactions above on the
accounts of Brankov Company using the balance sheet equation. B) Assume
Brankov Company owns 25% of the shares of Ramona Company. Show the effects
of the transactions above on the accounts of Brankov Company using the balance
sheet equation.
Recording Entries for Equity Investment: FV-NI and Equity Method
On January 1, 2020, Allen Corporation purchased 30% of the 66,000 outstanding common shares of Towne Corporation at $17 per share as a long-term investment. On the date of purchase, the book value and the fair value of the net assets of Towne Corporation were equal. During the year, Towne Corporation reported net income of $52,800 and declared and paid dividends of $17,600. As of December 31, 2020, common shares of Towne Corporation were trading at $20 per share.
Journal Entries with Significant Influence
Journal Entries without Significant Influence
Financial Statement Presentation
c. Indicate the amount of income that would be reported on the 2020 income statement and the investment balance on the 2020 year-end balance sheet under requirement (a) and requirement (b).
Income
Investment Net Balance
2020
Dec. 31, 2020
a. Investment accounted for under the equity method
Answer
Answer
b. Investment…
Chapter 16 Solutions
Intermediate Accounting (2nd Edition)
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 - Notes Receivable. On January 1, 2018, Racine...Ch. 16 - Debt Investment, Held to Maturity, Impairments....Ch. 16 - Debt Investment, Impairments, IFRS. Repeat E16-19...Ch. 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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