Disadvantages While the equity method has its benefits and is in compliance with GAAP, there are disadvantages to using this method. One disadvantage is the difficulty of the equity method. This method is longer and involves more gathering of data than other methods. Another disadvantage is the accounting for dividends. The equity method accounts for dividends as deductions from income rather that increasing income. Additionally, the equity method fails to consider market value. The disadvantages
Treasury stock 95,260 Retained earnings 2,400,840 Paid-in capital in excess of par 1,320,150 Prepare Wilco's December 31, 2012, stockholders' equity section Question 3: Woolford Inc. declared a cash dividend of $1.38 per share on its 2.22 million outstanding shares. The dividend was declared on August 1, payable on September 9 to all stockholders of record on August 15. Prepare the journal entries necessary on those three dates. Question 4:
for cash at $29 per share. Record the issuance of the preferred shares. (Omit the "$" sign in your response.) General Journal Debit Credit Cash 49,300 Preferred stock Additional paid-in capital 11. California Surf Clothing Company issues 1,300 shares of $7 par value common stock at $22 per share. Later in the year, the company decides to repurchase 130 shares at a cost of $35 per share. Record the purchase of treasury stock
statements, benefits every type of business. Most importantly, The Internal Revenue Service (IRS) requires that a business prepare and retain records and documents so that they can be audited. A business has to have the ability to compute taxable income. In addition, federal legislation requires public companies to have detailed and accurate books, records, and accounts of transactions and the nature of the company’s assets. The IRS would love to do your accounting for a company if they fail to
Puckett applies the equity method. Harrison distributed a dividend of $2 per share during the year and reported net income of $613,000. What is the balance in the Investment in Harrison account found in Puckett’s financial records as of December 31? $2,709,200. Acquisition price $ 2,640,000 Equity income ($613,000 × 40%) 245,200 Dividends (88,000 shares × $2) (176,000 ) Investment in Harrison
Cost method: A method of accounting for stock investments in which the investor company records its investment at cost and DOES NOT adjust the investment account balance later. Dividends received from the investee are credited to a Dividend Revenue account. Companies purchase ownership in other firms as a course of business. These events create concerns among investors
Subsequent to the acquisition, the holding company issued approximately 232 million shares of common stock, and exchanged 0.77942 shares for each one share of Chrysler LLC ownership. Fiat Chrysler Automobiles also paid each shareholder a special dividend of $1.30 per share prior to the closing. The third type of combination is
financial statements follow the accrual accounting model rather than cash-basis accounting. Companies who utilize cash-basis accounting methods only recognize revenue when received in cash and expenses are only recognized when paid in cash. Accrual accounting is the recognition of revenue when earned and the matching of expenses when incurred. Starbucks records revenue from 4 different sources: Company-operated stores, licensed stores, CPG foodservice and other revenues, and stored value cards.