INTERMEDIATE ACCOUNTING W/CONNECT
9th Edition
ISBN: 9781307050851
Author: SPICELAND
Publisher: MCG/CREATE
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Chapter 12, Problem 12.16E
Equity investments; fair value through net income
• LO12-4
On January 2, 2018, Sanborn Tobacco Inc. bought 5% of Jackson Industry’s capital stock for $90 million. Jackson Industry’s net income for the year ended December 31, 2018, was $120 million. The fair value of the shares held by Sanborn was $98 million at December 31, 2018. During 2018, Jackson declared a dividend of $60 million.
Required:
1. Prepare all appropriate journal entries related to the investment during 2018.
2. Assume that Sanborn sold the stock on January 2, 2019 for $110 million. Prepare the
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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
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1
2
3
4
Record the investment in Nursery Supplies shares.
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3 minutes ago
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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…
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…
Chapter 12 Solutions
INTERMEDIATE ACCOUNTING 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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