INTERMEDIATE ACCTI (LL) W/ ACCESS >CST
8th Edition
ISBN: 9781259717680
Author: SPICELAND
Publisher: MCGRAW-HILL CUSTOM PUBLISHING
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 12, Problem 12.15E
Equity investments; fair value through net income
• LO12-4
On March 31, 2018, Chow Brothers, Inc., bought 10% of KT Manufacturing’s capital stock for $50 million. KT’s net income for the year ended December 31, 2018, was $80 million. The fair value of the shares held by Chow was $35 million at December 31, 2018. KT did not declare or pay a dividend during 2018.
Required:
1. Prepare all appropriate journal entries related to the investment during 2018.
2. Assume that Chow sold the stock on January 20, 2019 for $30 million. Prepare the
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
EQUITY INVESTMENTS
Problem 4
On January 1, 2018, ABC Company purchased 40,000 shares of RST at P100 per share. The investment in
measurement at fair value through other comprehensive income. Brokerage fees measured to P120,000. A
P5 dividend per share of RST had been declared on December 15, 2017 to be paid on March 31, 2018 to
shareholders of record on January 31, 2018. No other transactions occurred in 2018 affecting the
investment in RST shares.
What is the initial measurement of the investment?
4,120,000
a.
b. 4,000,000
c. 3,920,000
d.
3,800,000
Problem 5
Care Company received dividends from its share investments during the year ended December 31, 2011 as
follows:
• A stock dividend of P4,000 shares from Part Company on July 31, 2011 when the market price of Part's
share was P20. Care owns less than 1% of Part's share capital.
• A cash dividend of P150,000 from Shark Company in which Day owns a 25% interest. Majority of
Shark's director are also directors of Care.
What amount of…
1. Nicole Company acquires 75% of Carl John Company (CJC) for P6,000,000. The
carrying and fair values of CJC's net assets at the time of acquisition are P4,500,000
and P4,900,000, respectively.
Required:
a. Determine the goodwill or gain on bargain purchase assuming the consideration
paid includes control premium of P852,000.
b. Determine the goodwill or gain on bargain purchase assuming the consideration
paid excludes control premium of P138,000 and the fair value of the non-con-
trolling interest is P736,500.
3. Father Corporation (FC) acquires 20% ownership interest in Son Corporation (SC)
on January 1, 202X, for P1,750,000 cash, which is the fair value of the investment
at that date. FC has concluded that it does not have a significant influence over SC.
At the same date, the fair and carrying values of SC's identifiable assets is
P5,000,000 and P3,000,000. The identifiable assets include land, which has fair and
carrying values of P4,000,000 and P3,000,000, respectively.
For the…
.
Exercise 12-20 (Algo) Equity method; purchase; Investee Income; dividends [LO12-6]
As a long-term investment at the beginning of the 2024 fiscal year, Florists International purchased 25% of Nursery Supplies
Incorporated's 10 million shares for $65 million. The fair value and book value of the shares were the same at that time. During the
year, Nursery Supplies earned net income of $24 million and distributed cash dividends of $0.80 per share. At the end of the year, the
fair value of the shares is $61 million.
Required:
Prepare the appropriate journal entries from the purchase through the end of the year.
Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers
in millions, (i.e., 10,000,000 should be entered as 10).
View transaction list
Journal entry worksheet
<
1
2
3
4
Record the investment in Nursery Supplies shares.
Chapter 12 Solutions
INTERMEDIATE ACCTI (LL) W/ ACCESS >CST
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...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- 8. On May 15, 2025, Mayer Co. invests $8,000 in John, Inc. stock. John, Inc. pays Mayer Co. a $200 dividend on November 15, 2025. Mayer Co. sells the John, Inc. stock on December 10, 2025, for $7,500. Assume the Mayer Co. does not have significant influence over John, Inc. Journalize the 2025 transactions related to Mayer Co.'s investment in John, Inc. stock. (Record debits first, then credits. Select the explanation on the last line of the journal entry table.) Begin by journalizing Mayer Co.'s initial investment in John, Inc. stock on May 15, 2025. Date May 15, 2025 Accounts and Explanation Debit Creditarrow_forward39. D On January 1, 2019, Caraga Company purchased equity securities to be held as financial assets measured at fair value through other comprehensive income. Market – 12/31/19 3,200,000 3,500,000 4,600,000 Market 12/31/2020 Security R Security S Security T Cost 3,000,000 4,000,000 5,000,000 3,700,000 4,700,000 On January 31, 2020, the entity sold Security R for P3,500,000. What amount should be recognized directly in retained earnings of as a result of the sale of investment in 2020? a. 500,000 b. 300,000 c. 200,000 d. 0arrow_forwardO Zero On July 1, 2020, ABC Corporation invested in the stocks of XYZ foreign corporation, by acquiring 10,000 shares at P12/share. On December 20, 2020, XYZ declared a 20% stock dividend payable on January 15, 2021. On January 2, 2021, ABC Corporation sold 10,000 shares for P13/share. Compute the net capital gain to be included in regular income. O30,000 O 15,000 O 10,000 O Zeroarrow_forward
- zion 9 Assume that on Dec. 31, 2014, Paul's Investment in Saint Account has a balance of $ 438,000. Paul's 80 % interest in Saint has a fair value of $ 468,000. On January 1, 2015, Paul sells all of its Saint shares for $ 450,000. What is the gain/loss on sale? OAS 15000 Loss OBS 12000 Gain OCS 33000 Loss OD.S 33000 Gain Lying to another question will save this response.arrow_forwardQuestion 7 During 2020, Crane Company purchased 91000 shares of Novak Corporation common stock for $1370000 as an equity investment. The fair value of these shares was $1299000 at December 31, 2020. Crane sold all of the Novak stock for $16 per share on December 3, 2021, incurring $67000 in brokerage commissions. Crane Company should report a realized gain on the sale of stock in 2021 of $86000. $19000. $157000. $90000.arrow_forwardProblem 7: In January 2020, Golden Company invested in P900,000 equity securities representing 15% interest in Rings Company. Golden Company incurred transaction cost of P100,000. On December 31, 2020, this investment has a market value of P950,000. On July 1, 2021, Golden Company sold all the investments for P1,200,000. 7.1 What amount of gain on sale should Golden Company recognize in profit or loss assuming the security was classified as Investment at FVPL? 7.2 How much is the amount transferred to Retained earnings upon sale assuming the security was classified as Investment at FVOCI? 7.3 Prepare all the necessary journal entries.arrow_forward
- Problem 16-13 (AICPA Adapted) 000.0E7 Presumptuous Company revealed the following information pertaining to dividends from nontrading investments in ordinary shares during the year ended December 31, 2021: The entity owned a 10% interest in Beal Company, which declared a cash dividend of P500,000 on November 30, 2021 to shareholders of record on December 31, 2021 and payable on January 15, 2022. On October 15, 2021, the entity received a liquidating dividend of P100,000 from Clay Mining Company. The entity owned a 5% interest in Clay Mining Company. What amount of dividend income should be reported for the current year? a. 500,000 b. 600,000 C. 150,000 d. 50,000 493arrow_forward- What is the unrealized gain (loss) reported in profit or loss for the year 2021?A. P31,000B. (P31,000)C. P43,000D. (P43,000) - How much was the gain or loss on the sale of CD shares? A. P1,100 gain B. P2,000 gain C. P15,000 loss D. P15,900 lossarrow_forward1. On January 3, 2020, Castle Corporation purchased the following equity securities as an investment: Number of Cost of Total Company Shares Share $20 Cost $ 8,000 24,000 600 ,7ב 400 2,000 800 B 12 22 These securities are classified as available for sale. Required: a. Prepare the journal entry to record the acquisition of the stock. b. On June 30, 2020, C Company paid dividends of $3.00 per share. Prepare the journal entry that would be used by Castle to record the dividend receipt. c. On December 31, 2020, the market values per share were: Company Market Value A $22 B 12 20 Prepare any journal entry or entries necessary to record these changes in market value. d. On March 14, 2021, Castle sold 800 shares of C Company for $18 per share. Prepare the journal entry to record the sale.arrow_forward
- The investments of Harlon Enterprises included the following cost and fair value amounts ($ in millions): Fair Value, Dec. 31 2022 N/A $ 37 Equity Investments A Corporation shares B Corporation shares C Corporation shares. D Industries shares Totals Cost $ 20 35 15 45 $115 1 Increase 2 Amount Harlon accounts for its equity investment portfolio at fair value through net income. Harlon sold its holdings of A Corporation shares on June 1, 2022, for $15 million. On September 12, it purchased the C Corporation shares. $ 2021 $ 14 Required: 1. What is the effect of the sale of the A Corporation shares and the purchase of the C Corporation shares on Harlon's 2022 pretax $ 35 N/A 46 $95 earnings? 2. At what amount should Harlon's securities equity investment portfolio be reported in its 2022 balance sheet? (For all requirements, enter your answers in millions, (i.e., 10,000,000 should be entered as 10).) 14 50 $101 6 million 5 milionarrow_forwardIn 2021, Milka Company purchased an investment in equity securities. The related data of December 31, 2021: Security No. of shares Initial Cost Fair value Transaction cost A 6,000 P300,000 P295,000 P15,000 B 8,000 280,000 260,000 20,000 C 10,000 400,000 458,200 20,000 The entity sold 2,400 shares of Security B on January 5, 2022, for P82,500. If measured at FVOCI, how much is the net effect on retained earnings in 2022?arrow_forwardIn 2021, Milka Company purchased an investment in equity securities. The related data of December 31, 2021: Security No. of shares Initial Cost Fair value Transaction cost A 6,000 P300,000 P295,000 P15,000 B 8,000 280,000 260,000 20,000 C 10,000 400,000 458,200 20,000 The entity sold 2,400 shares of Security B on January 5, 2022, for P82,500. If measured at FVPL, how much is the unrealized gain in 2021?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning
Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning
Financial instruments products; Author: fi-compass;https://www.youtube.com/watch?v=gvxozM3TUIg;License: Standard Youtube License