Sheffield Inc. purchased 30% of Nadal Corporation's 31,000 outstanding common shares at a cost of $15 per share on January 3, 2023. The purchase price of $15 per share was based solely on the book value of Nadal's net assets. On September 21, Nadal declared and paid a cash dividend of $40,200. On December 31, Sheffield's year end, Nadal reported net income of $88,000 for the year. Nadal shares had a fair value of $14.75 per share at December 31. Sheffield, a private Canadian corporation, applies ASPE. (a) Under the assumption that the 30% holding of Nadal does not give Sheffield significant influence over Nadal, identify the possible accounting methods Sheffield could use under ASPE to account for its investment. Prepare all required 2023 journal entries under each acceptable method. (Credit account titles are automatically indented when the 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. Record entries in the order displayed in the problem statement. List all debit entries before credit entries. Round answers to 0 decimal places, e.g. 5,275.) Date Account Titles and Explanation FV-NI method: (To record investment purchase) (To record receipt of dividend) (To record fair value adjustment) Debit Credit
Sheffield Inc. purchased 30% of Nadal Corporation's 31,000 outstanding common shares at a cost of $15 per share on January 3, 2023. The purchase price of $15 per share was based solely on the book value of Nadal's net assets. On September 21, Nadal declared and paid a cash dividend of $40,200. On December 31, Sheffield's year end, Nadal reported net income of $88,000 for the year. Nadal shares had a fair value of $14.75 per share at December 31. Sheffield, a private Canadian corporation, applies ASPE. (a) Under the assumption that the 30% holding of Nadal does not give Sheffield significant influence over Nadal, identify the possible accounting methods Sheffield could use under ASPE to account for its investment. Prepare all required 2023 journal entries under each acceptable method. (Credit account titles are automatically indented when the 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. Record entries in the order displayed in the problem statement. List all debit entries before credit entries. Round answers to 0 decimal places, e.g. 5,275.) Date Account Titles and Explanation FV-NI method: (To record investment purchase) (To record receipt of dividend) (To record fair value adjustment) Debit Credit
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
ChapterA2: Investments
Section: Chapter Questions
Problem 25E
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Transcribed Image Text:(To record investment purchase)
(To record receipt of dividend)
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Transcribed Image Text:3
Sheffield Inc. purchased 30% of Nadal Corporation's 31,000 outstanding common shares at a cost of $15 per share on January 3, 2023. The purchase price of $15
per share was based solely on the book value of Nadal's net assets. On September 21, Nadal declared and paid a cash dividend of $40,200. On December 31,
Sheffield's year end, Nadal reported net income of $88,000 for the year. Nadal shares had a fair value of $14.75 per share at December 31. Sheffield, a private
Canadian corporation, applies ASPE.
(a)
Under the assumption that the 30% holding of Nadal does not give Sheffield significant influence over Nadal, identify the possible accounting methods Sheffield
could use under ASPE to account for its investment. Prepare all required 2023 journal entries under each acceptable method. (Credit account titles are
automatically indented when the 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.
Record entries in the order displayed in the problem statement. List all debit entries before credit entries. Round answers to O decimal places, e.g. 5,275.)
Date
Account Titles and Explanation
FV-NI method:
(To record investment purchase)
(To record receipt of dividend)
(To record fair value adjustment)
Debit
Credit
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