Textbook Problem

Matching Accounting Methods and Investments

Consider the following accounting methods for long-term investments:

a. Amortized cost method

b. Fair value method

c. Equity method

d. Consolidation of parent and sub

Required:

Match one or more of these methods with each of the investments described below:

1. Mueller Inc. owns 75% of Johnston Corporation’s outstanding common stock.

2. Anderson Inc. owns 25% of Peterson Corporation’s outstanding common stock.

3. Wixon Corporation owns 12% of the outstanding common stock of Gilman Inc., which is classified as available-for-sale,

4. Kohler Corporation holds a $40,000 long-term note receivable from Bennett Inc., a major customer. Kohler expects to sell the note within the next 2 or 3 years.

5. Janis Products Inc. holds $200,000 in Gibson Manufacturing bonds. Janis plans to hold these until they mature.