Accounting for equity securities are done by cost method or equity method. Both methods are used on the basis of some parameters. Normally method of investment accounting is chosen on the basis of level of ownership in Investee Company. Requirement 1 To discuss: The method to be used for investment accounting

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Answer 1

Question

Chapter 15, Problem E15.14E

To determine

Concept Introduction:

Accounting for equity securities are done by cost method or equity method. Both methods are used on the basis of some parameters. Normally method of investment accounting is chosen on the basis of level of ownership in Investee Company.

Requirement 1

To discuss:

The method to be used for investment accounting

To determine

Requirement 2;

To prepare:

Journal entry for the investment transactions during 2016

Main solution:

Date Accounts Title& Explanation Debit Credit

Jan. 6, 2016 Investment in Phase Motors’ Stock $360000000

Cash $140400

(For recording purchase of stocks in Phase Motors)

Dec.31,2016 Investment in Phase Motors’ Stock $8000000

Equity in Earnings of Phase Motors $8000000

(For recording share in net income of Phase Motors)

Dec.31,2016 Cash $10000000

Investment in Phase Motors’ Stock $10000000

(For recording receipt of dividend)

To determine

Requirement 3;

To prepare: T account and disclosure of investment in the Balance Sheet as of December 31, 2016.

Main solution:

Investment in Phase Motors’ Stock

Debit Credit

Jan. 6, 2016 $360000000 Dec. 31, 2016 $10000000

Dec. 31, 2016 $8000000

Ending Balance $358000000

Phase Motors’ Stock

Balance Sheet (Partial)

As on December 31, 2016

Assets

Non-current assets;

Investment in Phase Motors’ Stock $358000000

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Answer 2

Question

Chapter 15, Problem E15.14E

To determine

Concept Introduction:

Accounting for equity securities are done by cost method or equity method. Both methods are used on the basis of some parameters. Normally method of investment accounting is chosen on the basis of level of ownership in Investee Company.

Requirement 1

To discuss:

The method to be used for investment accounting

To determine

Requirement 2;

To prepare:

Journal entry for the investment transactions during 2016

Main solution:

Date Accounts Title& Explanation Debit Credit

Jan. 6, 2016 Investment in Phase Motors’ Stock $360000000

Cash $140400

(For recording purchase of stocks in Phase Motors)

Dec.31,2016 Investment in Phase Motors’ Stock $8000000

Equity in Earnings of Phase Motors $8000000

(For recording share in net income of Phase Motors)

Dec.31,2016 Cash $10000000

Investment in Phase Motors’ Stock $10000000

(For recording receipt of dividend)

To determine

Requirement 3;

To prepare: T account and disclosure of investment in the Balance Sheet as of December 31, 2016.

Main solution:

Investment in Phase Motors’ Stock

Debit Credit

Jan. 6, 2016 $360000000 Dec. 31, 2016 $10000000

Dec. 31, 2016 $8000000

Ending Balance $358000000

Phase Motors’ Stock

Balance Sheet (Partial)

As on December 31, 2016

Assets

Non-current assets;

Investment in Phase Motors’ Stock $358000000

Expert Solution & Answer

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Answer 3

Question

Chapter 15, Problem E15.14E

To determine

Concept Introduction:

Accounting for equity securities are done by cost method or equity method. Both methods are used on the basis of some parameters. Normally method of investment accounting is chosen on the basis of level of ownership in Investee Company.

Requirement 1

To discuss:

The method to be used for investment accounting

To determine

Requirement 2;

To prepare:

Journal entry for the investment transactions during 2016

Main solution:

Date Accounts Title& Explanation Debit Credit

Jan. 6, 2016 Investment in Phase Motors’ Stock $360000000

Cash $140400

(For recording purchase of stocks in Phase Motors)

Dec.31,2016 Investment in Phase Motors’ Stock $8000000

Equity in Earnings of Phase Motors $8000000

(For recording share in net income of Phase Motors)

Dec.31,2016 Cash $10000000

Investment in Phase Motors’ Stock $10000000

(For recording receipt of dividend)

To determine

Requirement 3;

To prepare: T account and disclosure of investment in the Balance Sheet as of December 31, 2016.

Main solution:

Investment in Phase Motors’ Stock

Debit Credit

Jan. 6, 2016 $360000000 Dec. 31, 2016 $10000000

Dec. 31, 2016 $8000000

Ending Balance $358000000

Phase Motors’ Stock

Balance Sheet (Partial)

As on December 31, 2016

Assets

Non-current assets;

Investment in Phase Motors’ Stock $358000000

Expert Solution & Answer

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Answer 4

Question

Chapter 15, Problem E15.14E

To determine

Concept Introduction:

Accounting for equity securities are done by cost method or equity method. Both methods are used on the basis of some parameters. Normally method of investment accounting is chosen on the basis of level of ownership in Investee Company.

Requirement 1

To discuss:

The method to be used for investment accounting

To determine

Requirement 2;

To prepare:

Journal entry for the investment transactions during 2016

Main solution:

Date Accounts Title& Explanation Debit Credit

Jan. 6, 2016 Investment in Phase Motors’ Stock $360000000

Cash $140400

(For recording purchase of stocks in Phase Motors)

Dec.31,2016 Investment in Phase Motors’ Stock $8000000

Equity in Earnings of Phase Motors $8000000

(For recording share in net income of Phase Motors)

Dec.31,2016 Cash $10000000

Investment in Phase Motors’ Stock $10000000

(For recording receipt of dividend)

To determine

Requirement 3;

To prepare: T account and disclosure of investment in the Balance Sheet as of December 31, 2016.

Main solution:

Investment in Phase Motors’ Stock

Debit Credit

Jan. 6, 2016 $360000000 Dec. 31, 2016 $10000000

Dec. 31, 2016 $8000000

Ending Balance $358000000

Phase Motors’ Stock

Balance Sheet (Partial)

As on December 31, 2016

Assets

Non-current assets;

Investment in Phase Motors’ Stock $358000000

Expert Solution & Answer

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Answer 5

Chapter 15, Problem E15.14E

To determine

Concept Introduction:

Accounting for equity securities are done by cost method or equity method. Both methods are used on the basis of some parameters. Normally method of investment accounting is chosen on the basis of level of ownership in Investee Company.

Requirement 1

To discuss:

The method to be used for investment accounting

To determine

Requirement 2;

To prepare:

Journal entry for the investment transactions during 2016

Main solution:

Date Accounts Title& Explanation Debit Credit

Jan. 6, 2016 Investment in Phase Motors’ Stock $360000000

Cash $140400

(For recording purchase of stocks in Phase Motors)

Dec.31,2016 Investment in Phase Motors’ Stock $8000000

Equity in Earnings of Phase Motors $8000000

(For recording share in net income of Phase Motors)

Dec.31,2016 Cash $10000000

Investment in Phase Motors’ Stock $10000000

(For recording receipt of dividend)

To determine

Requirement 3;

To prepare: T account and disclosure of investment in the Balance Sheet as of December 31, 2016.

Main solution:

Investment in Phase Motors’ Stock

Debit Credit

Jan. 6, 2016 $360000000 Dec. 31, 2016 $10000000

Dec. 31, 2016 $8000000

Ending Balance $358000000

Phase Motors’ Stock

Balance Sheet (Partial)

As on December 31, 2016

Assets

Non-current assets;

Investment in Phase Motors’ Stock $358000000

Answer 6

Chapter 15, Problem E15.14E

To determine

Concept Introduction:

Accounting for equity securities are done by cost method or equity method. Both methods are used on the basis of some parameters. Normally method of investment accounting is chosen on the basis of level of ownership in Investee Company.

Requirement 1

To discuss:

The method to be used for investment accounting

Answer 7

Chapter 15, Problem E15.14E

To determine

Concept Introduction:

Accounting for equity securities are done by cost method or equity method. Both methods are used on the basis of some parameters. Normally method of investment accounting is chosen on the basis of level of ownership in Investee Company.

Requirement 1

To discuss:

The method to be used for investment accounting

Answer 8

To determine

Requirement 2;

To prepare:

Journal entry for the investment transactions during 2016

Main solution:

Date Accounts Title& Explanation Debit Credit

Jan. 6, 2016 Investment in Phase Motors’ Stock $360000000

Cash $140400

(For recording purchase of stocks in Phase Motors)

Dec.31,2016 Investment in Phase Motors’ Stock $8000000

Equity in Earnings of Phase Motors $8000000

(For recording share in net income of Phase Motors)

Dec.31,2016 Cash $10000000

Investment in Phase Motors’ Stock $10000000

(For recording receipt of dividend)

Answer 9

To determine

Requirement 2;

To prepare:

Journal entry for the investment transactions during 2016

Main solution:

Date Accounts Title& Explanation Debit Credit

Jan. 6, 2016 Investment in Phase Motors’ Stock $360000000

Cash $140400

(For recording purchase of stocks in Phase Motors)

Dec.31,2016 Investment in Phase Motors’ Stock $8000000

Equity in Earnings of Phase Motors $8000000

(For recording share in net income of Phase Motors)

Dec.31,2016 Cash $10000000

Investment in Phase Motors’ Stock $10000000

(For recording receipt of dividend)

Answer 10

To determine

Requirement 3;

To prepare: T account and disclosure of investment in the Balance Sheet as of December 31, 2016.

Main solution:

Investment in Phase Motors’ Stock

Debit Credit

Jan. 6, 2016 $360000000 Dec. 31, 2016 $10000000

Dec. 31, 2016 $8000000

Ending Balance $358000000

Phase Motors’ Stock

Balance Sheet (Partial)

As on December 31, 2016

Assets

Non-current assets;

Investment in Phase Motors’ Stock $358000000

Answer 11

To determine

Requirement 3;

To prepare: T account and disclosure of investment in the Balance Sheet as of December 31, 2016.

Main solution:

Investment in Phase Motors’ Stock

Debit Credit

Jan. 6, 2016 $360000000 Dec. 31, 2016 $10000000

Dec. 31, 2016 $8000000

Ending Balance $358000000

Phase Motors’ Stock

Balance Sheet (Partial)

As on December 31, 2016

Assets

Non-current assets;

Investment in Phase Motors’ Stock $358000000

Answer 12

Expert Solution & Answer

Answer 13

Expert Solution & Answer

Answer 14

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Answer 15

Ch. 15 - Prob. 1QC Ch. 15 - Which of the following investments is most likely...Ch. 15 - Prob. 3QC Ch. 15 - A company invested $45,000 in Yale Co. stock. The...Ch. 15 - Prob. 5QC Ch. 15 - Prob. 6QC Ch. 15 - Prob. 7QC Ch. 15 - Prob. 8QC Ch. 15 - Prob. 9QC Ch. 15 - Prob. 10QC

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Chapter 15 Solutions

Date	Accounts Title& Explanation	Debit	Credit
Jan. 6, 2016	Investment in Phase Motors’ Stock	$360000000
	Cash		$140400
	(For recording purchase of stocks in Phase Motors)

Dec.31,2016	Investment in Phase Motors’ Stock	$8000000
	Equity in Earnings of Phase Motors		$8000000
	(For recording share in net income of Phase Motors)

Dec.31,2016	Cash	$10000000
	Investment in Phase Motors’ Stock		$10000000
	(For recording receipt of dividend)

Investment in Phase Motors’ Stock
Debit		Credit
Jan. 6, 2016	$360000000	Dec. 31, 2016	$10000000
Dec. 31, 2016	$8000000

Ending Balance	$358000000

Phase Motors’ Stock
Balance Sheet (Partial)
As on December 31, 2016
Assets
Non-current assets;
Investment in Phase Motors’ Stock	$358000000