1.
Investment: The act of allocating money to buy a monetary asset, in order to generate wealth in the future is referred to as investment.
Equity investments: The financial instruments which claim ownership in the issuing company and pay a dividend revenue to the investor company, are referred to as equity securities. The investments in equity securities are referred to as equity investments.
Equity method: Equity method is the method used for accounting equity investments which claim a significant influence of above 20% but less than 50% in the outstanding stock of the investee company.
Debit and credit rules:
- Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in
stockholders’ equity accounts. - Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.
To Journalize: The entries related to the investments during 2018, for Company N assuming the investment is made under equity method.
2.
To Prepare: The investment revenue account, for Company N.
3.
To Prepare: The investment account, of Company N in Company V.
4.
To Explain: The effect of investment by Company N on December 31, 2018, in the statement of
Want to see the full answer?
Check out a sample textbook solutionChapter 12 Solutions
INTERMEDIATE ACCT VOL.2>CUSTOM<
- Question 14 Last year Ryland acquired a 15% investment in Susan for GHS10,000 and that remains carried at cost in Ryland accounts. This investment now has a fair value of GHS30,000. Ryland has just made a further acquisition of 40% of the shares in Susan for GHS100,000. The net assets of Susan have now been determined at GHS60,000 and the fair value of the NCI at GHS80,000. Ryland has a policy of valuing the NCI at fair value at the date of acquisition. Required: Calculate the goodwill arising on the acquisition of Susan. Question 15 Truran, the parent, owns 80% of a subsidiary and the NCI in the subsidiary is currently measured at GHS100,000. Truran, the parent has just acquired all the remaining shares paying GHS90,000. Truran, the parent has acquired 5% of the shares reducing the NCI to 15% paying GHS80,000. Required: Calculate the difference arising that will be taken to equity in both situations.arrow_forwardCh. 29. In 2020, CVR Energy, Inc. began purchasing stocks of Delek US Holdings, Inc. CVR acquired 15% stake in Delek in hopes to replace 3 of Delek’s board members. This is an example of which of the following? Group of answer choices white knight street sweep tender offerarrow_forwardProblem 11. On May 5, 2019, MacDougal Corp. exchanged 2,000 shares of its P25 par value ordinary treasury shares for a patent owned by Masset Co. The treasury shares were acquired in 2018 for P45,000. At May 5, 2019, MacDougal's ordinary shares was quoted at P38 per share, and the patent had a carrying value of P68,000 on Masset's books. MacDougal should record the patent at what amount?arrow_forward
- Question 10 On January 2, 2020, Tuao Company purchased 10% of Abulug Company’s outstanding ordinary shares for P20,000,000. Tuao is the largest single shareholder in Abulug and this gives Tuao the power to participate in the financial and operating policy decisions of the Abulug but is not control or joint control over those policies. Abulug reported profit of P10,000,000 and paid dividend of P4,000,000. What should be the balance in Tuao’s investment in Abulug Company at the end of 2020? Group of answer choices P20,600,000 P21,000,000 P20,000,000 P21,400,000arrow_forwardCh. 29. In 2021, Google, a company that specializes in internet-related service, acquired Fitbit, the fitness tracking company, to bolster its wearable capabilities. Google paid shareholders $7.25 per share in cash. This is an example of which of the following? Group of answer choices merger horizontal acquisition vertical acquisition conglomerate acquisitionarrow_forwardProblem 4. Mr. X is an investor in ABC Corporation. In 2020, he has 1,000 share holdings acquired at P120 per share classified as capital asset. Mr. X uses FIFO in costing his investment holdings. b. How much is the nondeductible loss in May? c. Supposing that all the remaining shares were liquidated in December 2021 at 130 per share, what would be the capital gain(loss) to be recognized.arrow_forward
- Problem 4. Mr. X is an investor in ABC Corporation. In 2020, he has 1,000 shareholdings acquired at P120 per share classified as a capital asset. Mr. X uses FIFO in costing his investment holdings b. How much is the nondeductible loss in May? c. Supposing that all the remaining shares were liquidated in December 2021 at 130 per share, what would be the capital gain(loss) to be recognized.arrow_forwardQuestion 1: Chapter 7 On 1 October 20X8 Pacemaker Co acquired 30 million of Vardine Co's 100 million shares in exchange for 75 million of its own shares. The fair value of Pacemaker Co's shares at the date of this share exchange was $1.60 each. Vardine Co's profit is subject to seasonal variation. Its profit for the year ended 31 March 20X9 was $100 million. $20 million of this profit was made from 1 April 20X8 to 30 September 20X8. Pacemaker Co has one subsidiary and no other investments apart from Vardine Co. What amount will be shown as 'investment in associate' in the consolidated statement of financial position of Pacemaker Co as at 31 March 20X9?arrow_forward4. SMC Corp. exchanges a piece of land for 10,000 shares of Nestle Co. ordinary share capital that has a P500 par value. The land has cost SMC Corp. P3,500,000 five years ago, and currently has a fair market value of P6,000,000. What is the total increase in paid capital as a result of this exchange?arrow_forward
- MC 5 P327On April 1, PP, Inc., exchanges P430,000 fair-value consideration for 70% of the outstanding stock of RR Corporation. The remaining 30% of the outstanding shares continued to trade at a collective fair value of P165, 000. RR's identifiable assets and liabilities each had book values that equaled their fair values of April 1 for a net total of P500,000. RR generated annual (12-month) revenues of P600,000 and expenses of P360,000 and paid no dividends. On a December 31 consolidated balance sheet, what should be reported as non-controlling interest?MC 6 P327-28January 1, 20x4, Payne Corp. purchased 70% of Shayne Corp's P10 par common stock for P900,000. On this date, the carrying amount of Shayne's net assets was P1,000,000. The fair values of Shayne's identifiable assets and liabilities were the same as their carrying amounts except for plant assets (net), which were P200, 000 in excess of the carrying amount. For the year ended December 31, 20x4, Shayne had net income of…arrow_forwardProblem 4. Mr. X is an investor in ABC Corporation. In 2020, he has 1,000 share holdings acquired at P120 per share classified as capital asset. Mr. X uses FIFO in costing his investment holdings. Required: a.) What would be the net capital gain in March? b.) How much is the nondeductible loss in May? c.) Supposing that all the remaining shares were liquidated in December 2021 at 130 per share, what would be the capital gain(loss) to be recognized.arrow_forwardQuestion 5 During 2021 Carla Vista Company purchased 9500 shares of Metlock Inc. for $25 per share. During the year Carla Vista Company sold 2250 shares of Metlock, Inc. for $30 per share. At December 31, 2021 the market price of Metlock, Inc.’s stock was $23 per share. What is the total amount of gain/(loss) that Carla Vista Company will report in its income statement for the year ended December 31, 2021 related to its investment in Metlock, Inc. stock? $-7750 $11250 $-19000 $-3250arrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education