INTERMEDIATE ACCOUNTING(LL)-W/CONNECT
9th Edition
ISBN: 9781260216141
Author: SPICELAND
Publisher: MCG CUSTOM
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Chapter 12, Problem 12.14P
Equity method
• LO12-6, LO12-7
On January 2, 2018, Miller Properties paid $19 million for 1 million shares of Marlon Company’s 6 million outstanding common shares. Miller’s CEO became a member of Marlon’s board of directors during the first quarter of 2018.
The carrying amount of Marlon’s net assets was $66 million. Miller estimated the fair value of those net assets to be the same except for a patent valued at $24 million above cost. The remaining amortization period for the patent is 10 years.
Marlon reported earnings of $12 million and paid dividends of $6 million during 2018. On December 31, 2018, Marlon’s common stock was trading on the NYSE at $18.50 per share.
Required:
1. When considering whether to account for its investment in Marlon under the equity method, what criteria should Miller’s management apply?
2. Assume Miller accounts for its investment in Marlon using the equity method. Ignoring income taxes, determine the amounts related to the investment to be reported in its 2018:
a. Income statement
b.
c. Statement of
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Problem 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?
Exercise 12-22 (Algo) Equity method; adjustment for depreciation [LO12-6, 12-7]
Fizer Pharmaceutical paid $85 million on January 2, 2024, for 5 million shares of Carne Cosmetics common stock. The investment
represents a 20% interest in the net assets of Carne and gave Fizer the ability to exercise significant influence over Carne's operations.
Fizer received dividends of $3 per share on December 21, 2024, and Carne reported net income of $35 million for the year ended
December 31, 2024. The fair value of Carne's common stock at December 31, 2024, was $35.50 per share.
• The book value of Carne's net assets was $210 million.
• The fair value of Carne's depreciable assets exceeded their book value by $50 million. These assets had an average remaining
useful life of ten years.
• The remainder of the excess of the cost of the investment over the book value of net assets purchased was attributable to
goodwill.
Required:
Complete the table below and prepare the appropriate journal entries…
7
On January 2, 2024, Miller Properties paid $19 million for 1 million shares of Marlon Company's 6 million outstanding common shares.
Miller's CEO became a member of Marlon's board of directors during the first quarter of 2024.
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The carrying amount of Marlon's net assets was $72 million. Miller estimated the fair value of those net assets to be the same except
for a patent valued at $36 million above cost. The remaining amortization period for the patent is 10 years.
Marlon reported earnings of $27 million and paid dividends of $6 million during 2024. On December 31, 2024, Marlon's common stock
was trading on the NYSE at $18.50 per share.
Required:
2. Assume Miller accounts for its Investment In Marlon using the equity method. Ignoring Income taxes, determine the amounts related
to the Investment to be reported in its 2024.
Note: Do not round Intermediate calculations. Enter all amounts as positive values. Enter your answers in millions rounded to 1
decimal…
Chapter 12 Solutions
INTERMEDIATE ACCOUNTING(LL)-W/CONNECT
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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