GB 112/212 MANAGERIAL ACC. W/ACCESS >C<
17th Edition
ISBN: 9781260218831
Author: Libby
Publisher: MCG CUSTOM
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Chapter A, Problem 2E
To determine
Fill the blanks with explanation and complete the given table.
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Company A purchased a certain number of Company B's outstanding voting shares at $25 per share as a long-term investment.
Company B had outstanding 32,000 shares of $12 par value stock.
Complete the following table relating to the measurement and reporting by Company A after acquisition of the shares of Company B
stock.
Required:
a. What level of ownership by Company A of Company B is required to apply the method?
b. What events should cause Company A to recognize revenue related to the investment in Company B?
c. After the acquisition date, how should Company A change the balance of the investment account with respect to the stock owned
in Company B (other than for the disposal of the investments)?
Additional information:
Net income reported by Company B in the first year
Dividends declared by Company B in the first year
Market price of Company B stock at the end of the first year
d. At acquisition, the investment account on the books of Company A should be debited for what amount?
e.…
1. The cost method of accounting for stock investments is used when the company acquires
a. Greater than 50% of the company's stock
b. Between 20% to 50% of the company's stock
c. Less than 20% of the company's stock
2. The significance of percentage of ownership relates to how much _____________ the acquiring company has in the new company.
a. data
b. control
c. confidence
Company A buys 15% of common stocks of Company B. Company A provides financial support to Company B, which is unavailable to finance its activities. Company A should record its investment in Company B as:
a.
Available for sale investment
b.
Trading investment
c.
As Investment using the equity method
d.
As Investment preparing consolidated financial statements
Chapter A Solutions
GB 112/212 MANAGERIAL ACC. W/ACCESS >C<
Ch. A - Prob. 1QCh. A - Explain the difference in accounting methods used...Ch. A - Explain how bonds held to maturity are reported on...Ch. A - Explain the application of the cost principle to...Ch. A - Under the fair value method, when and how does the...Ch. A - Under the equity method, why does the investor...Ch. A - Prob. 7QCh. A - Prob. 8QCh. A - Prob. 9QCh. A - Company X owns 40 percent of Company Y and...
Ch. A - Prob. 2MCQCh. A - Dividends received from stock that is reported as...Ch. A - Prob. 4MCQCh. A - Prob. 5MCQCh. A - When using the equity method of accounting, when...Ch. A - Prob. 7MCQCh. A - Prob. 8MCQCh. A - Which of the following is true regarding the...Ch. A - Prob. 10MCQCh. A - Matching Measurement and Reporting Methods Match...Ch. A - Prob. 2MECh. A - Prob. 3MECh. A - Prob. 4MECh. A - Prob. 5MECh. A - Prob. 6MECh. A - Prob. 7MECh. A - Prob. 8MECh. A - Prob. 9MECh. A - Prob. 10MECh. A - Prob. 11MECh. A - Prob. 1ECh. A - Prob. 2ECh. A - Recording Transactions in the Available-for-Sale...Ch. A - Prob. 4ECh. A - Prob. 5ECh. A - Reporting Gains and Losses in the Trading...Ch. A - Prob. 7ECh. A - Prob. 8ECh. A - Prob. 9ECh. A - Prob. 10ECh. A - Prob. 11ECh. A - Prob. 1PCh. A - Prob. 2PCh. A - Prob. 3PCh. A - Prob. 4PCh. A - Prob. 5PCh. A - Comparing Methods to Account for Various Levels of...Ch. A - Prob. 7PCh. A - Recording Investments for Significant Influence LO...Ch. A - Prob. 9PCh. A - Prob. 10PCh. A - Prob. 11PCh. A - Prob. 1APCh. A - Prob. 2APCh. A - Reporting Passive Investments During January 2017,...Ch. A - Prob. 4APCh. A - Prob. 5APCh. A - Prob. 6APCh. A - Prob. 1CONCh. A - Finding Financial Information Refer to the...Ch. A - Prob. 2CPCh. A - Prob. 3CPCh. A - Prob. 4CPCh. A - Prob. 5CPCh. A - Prob. 6CP
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- Jacobson Company is considering an investment in the common stock of Biltrite Company. What are the accounting issues surrounding the recording of income in future periods if Jacobson purchases: a. 15% of Biltrite’s outstanding shares. b. 40% of Biltrite’s outstanding shares. c. 100% of Biltrite’s outstanding shares. d. 80% of Biltrite’s outstanding shares.arrow_forwardHow much is the unrealized gain (loss) accumulated in equity as of December 31, 20x2? Karen Co. purchased the following equity securities on January 1, 20x1 for a total amount of P360,000. Cost Alaska Co. preference shares P200,000 160,000 Valdez Co. ordinary shares Totals P360,000 The shares did not qualify for recognition as held for trading, thus they were classified as investment in equity securities measured at fair value through other comprehensive income. On December 31, 20x1, the portfolio of Karen Co. comprised the following. Fair value - 12/31/x1 Alaska Co. preference shares P240,000 60,000 Valdez Co. ordinary shares Total P300,000 On December 31, 20x2, the portfolio of Karen Co. comprised the following: Fair value - 12/31/x2 Alaska Co. preference shares P220,000 180,000 Valdez Co. ordinary shares Total P400,000 On February 2, 20x3, all of the Alaska Co. preference shares were sold for P160,000 net of transaction costs. 0 100,000 40,000 O (40,000)arrow_forward9 A company holds between 20% and 50% of the outstanding stock of an investee, gaining a significant influence over the investee. Which statement accurately characterizes this company's situation? The investor adjusts the investment to fair value with an unrealized gain or loss. O The investor records the receipt of dividends in the dividend revenue account. O The investor adjusts retained earnings to recognize investee's gains and losses. The investor records the proportionate share of the investee's net income.arrow_forward
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- 50Equity securities acquired by a corporation which are accounted for by reporting unrealized holding gain/loss in the equity section of the statement of financial position. a. Investment at FVPL where a company has holdings of less than 20% b. Investment at FVOCI where a company has holdings of less than 20% c. Investment where a company has holdings of between 20% and 50% d. Investment where a company has holdings of more than 50%arrow_forwardCase 2-1. Audit of investment in equity investments at foir volue through profit or loss; Substantive audit procedures. You were able to obtain the following iedger details of Equity investment-FVTPL in connection with your audit of the Strong Corporation for the year ended December 31, 2020: Credit Date Jan. 10 Particulars Purchase of Alpha Co. - 6,000 shares Debit P1,440,000 Feb. 20 Purchase of Beta Co. - 7,200 shares Sale of Beta Co. - 2,400 shares 1,800,000 Mar. 1 540,000 Receipt of Alpha share dividend- Offsetting Credit to retained earnings Sale of Alpha - 4,800 shares Sale of Alpha - 1,200 shares May 31 132,000 Aug. 15 Sept. 1 1,176,000 276,000 The following information was obtained during your examination: • Fram independent sources, you determine the follawing dividend information for Alpha Co. in 2020: Declared 01/02 0s/02 08/01 Record 01/15 05/15 Nature Cash Payment 01/31 Rate P20/share Share 05/31 10% Cash 08/30 09/15 P30/share • Closing market quotation as at December 31,…arrow_forwardAn equity investment in less than 20% of another companys outstanding stock is accounted for using the fair value method.Answer:TrueFalsearrow_forward
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