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Concept explainers
1.
Indicate the method used by Company C to account the investment in Corporation S under Case A and Case B.
2.
a.
Journalize the purchase of investment in Company C stock for Case A and Case B.
b.
Journalize the income reported by Corporation S, for Case A and Case B.
c.
Journalize the dividends paid by Corporation S, for Case A and Case B.
d.
Journalize the
3.
a.
Show the amounts related to investments, reported on the balance sheet of Company C.
b.
Show the amounts related to investments, reported on the statement of
c.
Show the revenue related to investments, reported on the income statement of Company C.
4.
Explain the reasons for the differences between the Case A and Case B investments.
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Chapter A Solutions
GB 112/212 MANAGERIAL ACC. W/ACCESS >C<
- On November 1 of Year 1, Drucker Co. acquired the following investments in equity securities measured at FV-NI. Kelly Corporation 400 shares of common stock (no-par) at $60 per share Keefe Corporation 240 shares preferred stock ($10 par) at $20 per share On December 31, the company's year-end, the quoted market prices were as follows: Kelly Corporation common stock, $52, and Keefe Corporation preferred stock, $24. Following are the data for the following year (Year 2). Mar. 02: Dividends per share, declared and paid: Kelly Corp., $1, and Keefe Corp., $0.50. Oct. 01: Sold 80 shares of Keefe Corporation preferred stock at $25 per share. Dec. 31: Fair values: Kelly common, $46 per share, Keefe preferred, $26 per share. Year 1 Year 2 d. Prepare the entries required in Year 2 to record dividend revenue, the sale of stock, and the fair value adjustment. Assume that the Fair Value Adjustment account needs to be adjusted for the investment portfolio on December 31, Year 2. Date Mar. 2, Year 2…arrow_forwardOn November 1 of Year 1, Drucker Co. acquired the following investments in equity securities measured at FV‑NI. Kelly Corporation 800 shares of common stock (no-par) at $60 per share Keefe Corporation 480 shares preferred stock ($10 par) at $20 per share On December 31, the company’s year-end, the quoted market prices were as follows: Kelly Corporation common stock, $52, and Keefe Corporation preferred stock, $24.Following are the data for the following year (Year 2).Mar. 02: Dividends per share, declared and paid: Kelly Corp., $1, and Keefe Corp., $0.50.Oct. 01: Sold 160 shares of Keefe Corporation preferred stock at $25 per share.Dec. 31: Fair values: Kelly common, $46 per share, Keefe preferred, $26 per share. Year 1 Year 2 xx d. Prepare the entries required in Year 2 to record dividend revenue, the sale of stock, and the fair value adjustment. Assume that the Fair Value Adjustment account needs to be adjusted for the investment portfolio on December 31, Year 2.arrow_forwardOn November 1 of Year 1, Drucker Co. acquired the following investments in equity securities measured at FV‑NI. Kelly Corporation 800 shares of common stock (no-par) at $60 per share Keefe Corporation 480 shares preferred stock ($10 par) at $20 per share On December 31, the company’s year-end, the quoted market prices were as follows: Kelly Corporation common stock, $52, and Keefe Corporation preferred stock, $24.Following are the data for the following year (Year 2).Mar. 02: Dividends per share, declared and paid: Kelly Corp., $1, and Keefe Corp., $0.50.Oct. 01: Sold 160 shares of Keefe Corporation preferred stock at $25 per share.Dec. 31: Fair values: Kelly common, $46 per share, Keefe preferred, $26 per share. Year 1 Year 2 a. Prepare the entry for Drucker Company to record the purchase of the securities.b. Prepare any adjusting entry needed at December 31, Year 1.Note: If a journal entry isn't required for the transaction, select "N/A—Debit" and "N/A—Credit" as the…arrow_forward
- nts CFAS Company showed the following information from its shareholders' equity at year-end before the effect of the transaction below: Ordinary share capital P6,250,000 Share premium 3,125,000 Retained earnings 3,724,000 Treasury shares (at cost) 1,530,000 The ordinary shares were originally issued for P187.50 per share. At the end of the year, CFAS Company retired 5,100 shares held in treasury. The treasury shares had a P125 par value per share and an average cost per share of P300. (Input your answers as figures, do NOT put any comma, peso sign or extra spaces. E.g. if your answer is one thousand, please input 1000): 1. How much is the adjusted ordinary share capital at year end? 2. How much is the adjusted share premium at year end? 3. How much is the adjusted balance of retained earnings at year end?arrow_forwardFairbanks Corporation purchased 400 ordinary shares of Sherman Inc. as a trading investment for E13,200. During the year, Sherman paid a cash dividend of ÂŁ3.25 per share. At year-end, Sherman shares were selling for ÂŁ34.50 per share. How much total revenues (all revenues) should be recognized from this investment during the year? Select one: Oa. $1900 Ob. $700 OC $1300 Od. $600arrow_forwardAylmer Corp has the following transactions relating to investments. Aylmer Corp has a December 31 year end. 01-Sep-19 Aylmer Corp purchased 3,100 shares of Belmont Inc at $13.00 per share. 31-Oct-19 Belmont Inc paid dividends of $5.00 per share. 31-Dec-19 Belmont Inc shares had a fair value of $12.00 per share. 31-Dec-19 Belmont Inc reported net income of $63,000 for the year. 01-Mar-20 Aylmer Corp sold all of Belmont Inc shares for $17.00 per share. Additional Information: Assume Aylmer Corp uses the fair value through other comprehensive income (FV-OCI) method to account for its investments. Dividend income is required to be recorded in a separate account. REQUIRED: Prepare the appropriate entries for the above transactions.arrow_forward
- On 1 January 20X8 a company purchased 40,000 $1 listed equity shares at a price of $3 per share. An irrevocable election was made to recognise the shares at fair value through other comprehensive income. Transaction costs were $3,000. At the year end of 31 December 20X8 the shares were trading at $6 per share. What amount in respect of these shares will be shown under 'investments in equity instruments' in the statement of financial position as at 31 December 20X8?arrow_forwardOn May 1, Republic Corporation purchased 400 shares of stock for P114 per share and held it as FVTPL financial assets. The price decreased to P106 per share on August 1 and then increased to P122 on December 31. During the year, the company received dividends of P3.50 per share. At what amount should the investment be valued in the December 31 balance sheet?arrow_forwardThe equity section of Whispering Inc. at January 1, 2022, was as follows. Share capital-ordinary $390,000 Accumulated other comprehensive income Unrealized holding gain on equity securities designated at fair value through other comprehensive income 65,000 Retained earnings 26,000 During the year, the company had the following transactions. 1. Issued 13,000 shares at $3 per share. 2. Dividends of $12.200 were declared and paid. 3. Net income for the year was $130,000. Unrealized holding loss of $6,500 occurred on its equity securities designated at fair value through other comprehensive 4. income. Prepare a statement of changes in equity for Whispering Inc. WHISPERING INC.arrow_forward
- BFAR Corp. has 200,000 shares authorized and has the following information at the end of its first year of operation: Share Capital, P75 par value: P7,500,000 • Share Premium: $405,000 . Accumulated Profits: P1,234,000 ● What was the issue price per share? Do not round-off intermediate computations (step calculations) but round-off final answer to nearest centavos (2 decimal places) if the final answer is not a whole number.arrow_forwardArmadillo Enterprises acquired the following equity investmentsat the beginning of year 1 as trading investments. Description Number of shares Market price per share Total price Finestra Company 15,000 x $25 $387,500 BVD Company 20,000 X$18 $360,000 Market values at theend of Years 1 &2 are presented below: Market/Fair Value End of year 1 End of year 2 Finestra Company $19 $23 BVD Company |$22 $28 REQUIREMENTS: Prepare the journal entry to record the acquisition of theinvestments. Prepare the adjusting journal entry required at the end of year1. Armadillo Enterprises sells 15,000 shares of BVD Company for $16at the beginning of year 2. Prepare the journal entry to record thesale. Prepare the adjusting journal entry required at the end of year2. Assume that ArmadilloEnterprises now holds these investments asavailable-for-sale. Prepare the journal entry to record the acquisition of theinvestments. Prepare the adjusting journal entry required at the end of year1. Armadillo Enterprises…arrow_forward(Equity Method) Parent Co. invested $1,000,000 in Sub Co. for 25% of its outstanding stock. Sub Co. pays out 40% of net income in dividends each year.InstructionsUse the information in the following T-account for the investment in Sub to answer the following questions. Investment in Sub Co. 1,000,000  110,000   44,000 (a) How much was Parent Co.’s share of Sub Co.’s net income for the year?(b) What was Sub Co.’s total net income for the year?(c) What was Sub Co.’s total dividends for the year?(d) How much was Parent Co.’s share of Sub Co.’s dividends for the year?arrow_forward
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage LearningFinancial AccountingAccountingISBN:9781305088436Author:Carl Warren, Jim Reeve, Jonathan DuchacPublisher:Cengage Learning
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