E17.16 (LO 2, 3) (Fair Value and Equity Method Compared) Jaycie Phelps Inc. acquired 2o icethe outstanding common stock of Theresa Kulikowski Inc on December 31, 2020. The purchase pricewas $1,200,000 for 50,000 shares. Kulikowski Inc. declared and paid an $0.85 per share cash dividend onJune 30 and on December 31, 2021. Kulikowski reported net income of $730,000 for 2021. The air vardeof Kulikowski's stock was $27 per share at December 31, 2021.Instructionsa. Prepare the journal entries for Jaycie Phelps Inc. for 2020 and 2021, assuming that Phelps cannotexercise significant influence over Kulikowski.b. Prepare the journal entries for Jaycie Phelps Inc. for 2020 and 2021, assuming that Phelps can exer-cise significant influence over Kulikowski.c. At what amount is the investment in securities reported on the balance sheet under each of these methodsat December 31, 2021? What is the total net income reported in 2021 under each of these methods?

Financial transactions are recorded in the for of journal entry.

Answered: E17.16 (LO 2, 3) (Fair Value and Equity…

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

ChapterA2: Investments

Section: Chapter Questions

Problem 24E

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LO.4, 7 In December 2019, Carl Corporation sold land it held as an investment. The corporation received 50,000 in 2019 and a note payable (with adequate interest) for 150,000 to be paid in 2021. Carl Corporations cost of the land was 80,000. The corporation has a 90,000 net capital loss carryover that will expire in 2019. Should Carl Corporation report the sale in 2019 or use the installment method to report the income as payments are received?
S16-9 On January 6, 2023, Ling Corp. paid $5,000,000 for its 40 percent investment in True World Inc. Assume that on December 31 that same year, True World earned net income of $1,800,000 and paid cash dividends of $800,000. What method should Ling Corp. use to account for the investment in True World Inc.? Give your reason. Ignore any brokerage commission expenses. Post to the Investment in True World Inc. Common Shares T- account. What is its balance after all the transactions are posted? Journalize these three transactions on the books of Ling Corp. Include an explanation for each entry.
28 On February 28, 2022, P Corp. purchased 80% of S Co.’s P10 par ordinary shares for P986,000. On this date, the carrying amount of S’s net assets was P1,000,000. The fair values of S Co.’s identifiable assets and liabilities were the same as their carrying amounts except for inventory which is overvalued by P15,000 and plant assets (net), which were P120,000 in excess of the carrying amount. The estimated remaining life of the asset is 5 years. For the year ended December 31, 2022, S had net income of P354,000 and paid cash dividends to P Corp. of P112,000 (all coming from post-acquisition Retained Earnings). Loss on impairment of goodwill in 2022 amounted to P20,000. P Corp. uses the fair value method in measuring non-controlling interest. Revenues were earned evenly throughout the year Determine the non-controlling interest in net asset of subsidiary on December 31, 2022.
On January 1, 2020, the Deluxe Corporation purchased equity securities to be held for trading purposes for P2,000,000. The company also paid commission, taxes and other transaction costs amounting to P50,000. The securities had fair values at December 31, 2020 and 2021, respectively; P1,750,000 and P2,100,000. No securities were sold during 2021. What amount of unrealized gain or loss should be reported in the 2021 profit or loss section of the statement of comprehensive income?
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On January 1, 2020, the Pacita Corporation purchased equity securities for P2,000,000. The company also paid commission, taxes and other transaction costs amounting to P50,000. Because the securities were acquired not for immediate trading, Pacita exercised its option to measure the change in fair value through other comprehensive income. The securities had the following market values at December 31, 2020 and 2021, respectively: P1,750,000 and P2,100,000. No securities were sold during 2020 and 2021. What amount of unrealized gain or loss should be reported in December 31, 2021 statement of financial position as a component of shareholders’ equity?
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