INTERMEDIATE ACCOUNTING RMU 9TH EDITION
9th Edition
ISBN: 9781260998726
Author: SPICELAND
Publisher: MCG
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Chapter 12, Problem 12.14BE
Equity method investments
• LO12-6, LO12-9
Kim Company bought 30% of the shares of Phelps, Inc., at the start of 2018. Kim paid $10 million for the shares. Thirty percent of the book value of Phelps’s net assets is $8 million, and the difference of $2 million is due to land that Phelps owns that has appreciated in value. During 2018, Phelps reported net income of $1 million and paid a cash dividend of $0.5 million. At what amount does Kim carry the Phelps investment on its
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On January 1, 2024, Clor-Proell Enterprises bought 20% of the outstanding common stock of Chen Construction Company for $600
million cash. Chen's net income for the year ended December 31, 2024, was $300 million. During 2024, Chen declared and paid cash
dividends of $60 million. Clor-Proell recorded the investment as follows:
points
PURCHASE
General Journal
($ in millions)
Debit
Credit
Investment in Chen Construction shares
Cash
600
600
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NET INCOME
Investment in Chen Construction shares (20% x $300 million)
60
Investment revenue
60
DIVIDENDS
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Cash (20% x $60 million)
12
Investment in Chen Construction shares
12
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What would be the pretax amounts related to the investment that Clor-Proell would report in its statement of cash flows for the year
ended December 31, 2024?
Note: Enter your answers in millions (i.e., 10,000,000 should be entered as 10). Cash outflows should be indicated with a minus
sign.
Operating activities
$
600
Investing activities…
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Live Large Inc. had the following transactions involving non-strategic investments during 2023.
2023
Apr. 1 Paid $100,ese to buy a 90-day term deposit, $100,000 principal amount, 5.0%, dated April 1. There was a $50 transaction
fee included in the above-noted payment amount.
12 Purchased 3,000 common shares of Blue Balloon Ltd. at $22.25. There was a $50 transaction fee included in the above-noted
payment amount.
June 9 Purchased 1,800 common shares of Purple Car Corp. at $49.50. There was a $50 transaction fee included in the above-noted
payment amount.
20 Purchased 700 common shares of Yellow Tech Ltd. at $15.75. There was a $50 transaction fee included in the above-noted
payment amount.
July 1 Purchased for $67,412 a 7.0%, $65,000 Space Explore Inc. bond that matures in eight years when the market interest rate
was 6.4%. There was a $50 transaction fee included in the above-noted payment amount. Interest is paid semiannually
beginning December 31, 2023. Live Large…
INVESTMENT IN ASSOCIATE
Problem 7
On January 1, 2020, Elite Company paid P 18,000,000 for 50,000 ordinary shares of Craze Company which
represent a 25% interest in the in the net assets of Craze. The acquisition cost is equal to the carrying
amount of the net assets acquired. Elite has the ability to exercise significant influence over Craze.
Elite received a dividend of P35 per share from Craze in 2020. Craze reported net income of P9,600,000 for
the year ended December 31, 2020.
In the December 31, 2020 statement of financial position, what amount should be reported as investment
in Craze Company?
a. 22,150,000
b. 20,400,000
c. 18,650,000
d. 18,000,000
Problem 8
On July 1, 2015, Denver Company purchased 30,000 shares of Eagle Company's 100,000 outstanding
ordinary shares for P200 per share. On December 15, 2015, Eagle paid P400,000 in dividends to its share
ordinary shareholders.
Eagle's net income for the year ended December 31, 2015 was P1,200,000, earned evenly throughout the…
Chapter 12 Solutions
INTERMEDIATE ACCOUNTING RMU 9TH EDITION
Ch. 12 - All investments in debt securities are classified...Ch. 12 - When market rates of interest rise after a...Ch. 12 - Does GAAP distinguish between fair values that are...Ch. 12 - When a debt investment is acquired to be held for...Ch. 12 - Prob. 12.5QCh. 12 - What is comprehensive income? Its composition...Ch. 12 - Why are holding gains and losses treated...Ch. 12 - Prob. 12.8QCh. 12 - Prob. 12.9QCh. 12 - Prob. 12.10Q
Ch. 12 - Under IFRS No. 9, which reporting categories are...Ch. 12 - Prob. 12.12QCh. 12 - Do U.S. GAAP and IFRS differ in the amount of...Ch. 12 - Under what circumstances is the equity method used...Ch. 12 - The equity method has been referred to as a...Ch. 12 - In the application of the equity method, how...Ch. 12 - Prob. 12.17QCh. 12 - Prob. 12.18QCh. 12 - Prob. 12.19QCh. 12 - How does IFRS differ from U.S. GAAP with respect...Ch. 12 - What is the effect of a company electing the fair...Ch. 12 - Define a financial instrument. Provide three...Ch. 12 - Some financial instruments are called derivatives....Ch. 12 - (Based on Appendix 12A) Northwest Carburetor...Ch. 12 - Prob. 12.25QCh. 12 - Prob. 12.26QCh. 12 - (Based on Appendix 12B) Reporting an investment at...Ch. 12 - Prob. 12.28QCh. 12 - Explain how the CECL model (introduced in ASU No....Ch. 12 - Prob. 12.30QCh. 12 - Prob. 12.1BECh. 12 - Prob. 12.2BECh. 12 - Trading securities LO12-3 For the Coca-Cola bonds...Ch. 12 - Available -for-sale securities LO12-4 SL...Ch. 12 - Available -for-sale securities LO12-4 For the...Ch. 12 - Prob. 12.6BECh. 12 - Prob. 12.7BECh. 12 - Prob. 12.8BECh. 12 - Prob. 12.9BECh. 12 - Prob. 12.10BECh. 12 - Equity investments and dividends LO12-5 Turner...Ch. 12 - Prob. 12.12BECh. 12 - Prob. 12.13BECh. 12 - Equity method investments LO12-6, LO12-9 Kim...Ch. 12 - Change in principle; change to the equity method ...Ch. 12 - Fair value option; equity method investments ...Ch. 12 - Prob. 12.17BECh. 12 - Impairments (AFS Credit Loss Model) (Appendix 12B)...Ch. 12 - Prob. 12.19BECh. 12 - Prob. 12.20BECh. 12 - Prob. 12.1ECh. 12 - Prob. 12.2ECh. 12 - Securities held-to-maturity LO12-1 FFT...Ch. 12 - Prob. 12.4ECh. 12 - Prob. 12.5ECh. 12 - Trading securities LO12-1 [This is a variation of...Ch. 12 - Various transactions relating to trading...Ch. 12 - Prob. 12.8ECh. 12 - Securities available-for-sale; adjusting entries ...Ch. 12 - Available -for-sale securities LO12-1, LO12-4...Ch. 12 - Available -for-sale securities LO12-1, LO12-4...Ch. 12 - Available -for-sale securities LO12-1, LO12-4...Ch. 12 - Classification of securities; adjusting entries ...Ch. 12 - Prob. 12.14ECh. 12 - Equity investments; fair value through net income ...Ch. 12 - Equity investments; fair value through net income ...Ch. 12 - Prob. 12.17ECh. 12 - Equity investments; fair value through net income ...Ch. 12 - Investment securities and equity method...Ch. 12 - Equity method; purchase; investee income;...Ch. 12 - Error corrections; equity method investment ...Ch. 12 - Prob. 12.22ECh. 12 - Prob. 12.23ECh. 12 - Prob. 12.24ECh. 12 - Prob. 12.25ECh. 12 - Prob. 12.26ECh. 12 - Prob. 12.27ECh. 12 - Prob. 12.28ECh. 12 - Prob. 12.29ECh. 12 - Prob. 12.30ECh. 12 - Prob. 12.31ECh. 12 - Prob. 12.32ECh. 12 - Accounting for impairments under IFRS (Appendix...Ch. 12 - Prob. 12.1PCh. 12 - Prob. 12.2PCh. 12 - Securities available-for-sale; bond investment;...Ch. 12 - Prob. 12.4PCh. 12 - Various transactions related to trading securities...Ch. 12 - Various transactions related to securities...Ch. 12 - Prob. 12.7PCh. 12 - Various transactions relating to trading...Ch. 12 - Securities held-to-maturity; securities available...Ch. 12 - Investment securities and equity method...Ch. 12 - Prob. 12.11PCh. 12 - Prob. 12.12PCh. 12 - Prob. 12.13PCh. 12 - Equity method LO12-6, LO12-7 On January 2, 2018,...Ch. 12 - Prob. 12.15PCh. 12 - Prob. 12.16PCh. 12 - Accounting for debt and equity investments ...Ch. 12 - Prob. 12.18PCh. 12 - Real World Case 121 Intels investments LO12-4 The...Ch. 12 - Prob. 12.2BYPCh. 12 - Prob. 12.4BYPCh. 12 - Prob. 12.6BYPCh. 12 - Real World Case 127 Comprehensive income Microsoft...Ch. 12 - Continuing Cases Target Case LO12-4, LO12-6...
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