Business
Engineering
Math
Science
Social Science
Cornerstones of Financial Accounti...
Solutions
Cornerstones of Financial Accounti...
Fair Value and Equity Methods
Nadal Corporation purchased 10.000 shares of Cutler Inc.’s common stock, on January 1, 2019, for S 100.000. During 2019, Cutler declared and paid cash dividends to Nadal in the amount of S8.000. Nadal’s share of Cutler’s net income for 2019 was $12,400. At December 31, 2019, the fair value of 10.000 shares of Cutler’s common stock, was S120.000. This is Nadal’s only investment.
Required:
1. Assume that Cutler has 75.000 shares of common stock outstanding. What journal entries will Nadal make during 2019 relative to this investment?
2. Assume that Cutler has 40.000 shares of common stock outstanding. What journal entries will Nadal make during 2019 relative to this investment?
Concept introduction:
Fair Value Method: Fair market value method is applied when there is less than 20% share in company. In fair market value method we value the investment on its market value and difference is recorded in the income statement as a profit or loss.
Equity Method: In equity method we value the investment on the basis of their proportionate share in the assets of the investee company. Equity method applies when there is at least 20% share holding in the company. When there is 20% holding in any company then we have a significant control over the company.
Requirement 1:
To calculate:
Journal entry to record the investment.
Investment % = 10000/75000
= 13.33%
Cash A/c 8000
Dividend income A/c 8000
(Being dividend received in cash)
Concept introduction:
Fair Value Method: Fair market value method is applied when there is less than 20% share in company. In fair market value method we value the investment on its market value and difference is recorded in the income statement as a profit or loss.
Equity Method: In equity method we value the investment on the basis of their proportionate share in the assets of the investee company. Equity method applies when there is at least 20% share holding in the company. When there is 20% holding in any company then we have a significant control over the company.
Requirement 2:
To calculate:
Journal entry to record the investment.
Chapter A2 Solutions
Additional Business Solutions
Find more solutions based on key concepts
Show solutions addGross profit method Based on the following data, estimate the cost of the ending inventory: Sales 9,250,000 Est...
Corporate Financial Accounting
Allowance method entries The following transactions were completed by Irvine Company during the current fiscal ...
Financial & Managerial Accounting
Recently, the U.S. federal government and the American Institute of Certified Public Accountants (AICPA) have t...
Accounting Information Systems
If you bought a share of common stock, you would probably expect to receive dividends plus an eventual capital ...
Fundamentals of Financial Management, Concise Edition (MindTap Course List)
RETURN ON EQUITY Commonwealth Construction (CC) needs 3 million of assets to get started, and it expects to hav...
Fundamentals of Financial Management (MindTap Course List)
A survey of 131 investment managers in Barrons Big Money poll revealed the following: 43% of managers classifie...
STATISTICS F/BUSINESS+ECONOMICS-TEXT
Why is productivity important?
Principles of Macroeconomics (MindTap Course List)
CORPORATE VALUATION Scampini Technologies is expected to generate 25 million in free cash flow next year, and F...
Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
Why should policymakers think about incentives?
Principles of Microeconomics (MindTap Course List)
The article cited in Exercise 20 also gave the following values of the variables y = number of culs-de-sac and ...
Probability and Statistics for Engineering and the Sciences
(Economic Systems) The United States is best described as having a mixed economy. What are some elements of com...
ECON: MICRO4 (New, Engaging Titles from 4LTR Press)
Stagflation is caused by a. a leftward shift in the aggregate-demand curve. b. a rightward shift in the aggrega...
Brief Principles of Macroeconomics (MindTap Course List)
What are the disadvantages of a sole proprietorship?
Foundations of Business (MindTap Course List)
Citations: Citing Secondary Resources Using MLA Format. You will want to stay up-to-date on your career field b...
Essentials of Business Communication (MindTap Course List)
Draw a circular-flow diagram. Identify the parts of the model that correspond to the flow of goods and services...
Principles of Economics (MindTap Course List)
Why is the common measures bias especially prevalent in companies that use scorecard cascading?
Financial And Managerial Accounting
How does Proofpoint safeguard patient privacy? Could Proofpoint (to the same for university an(t corporate emai...
Fundamentals of Information Systems
Identify several BI tools.
Fundamentals of Information Systems
Using the ERD from Problem 10, create the relational schema. (Create an appropriate collection of attributes fo...
Database Systems: Design, Implementation, & Management
Using a Microsoft Windows system, open Internet Explorer. Click Internet Options on the Tools menu. Examine the...
Principles of Information Security (MindTap Course List)
In the NONGAME table, change the description of item number DL51 to Classic Train Set.
A Guide to SQL
Many of us use heuristics each day in completing ordinary activitiessuch as planning our meals, executing our w...
Principles of Information Systems (MindTap Course List)
Use examples to compare and contrast unstructured and structured data. Which type is more prevalent in a typica...
Database Systems: Design, Implementation, & Management
What are the two basic types of tapping toolholders?
Precision Machining Technology (MindTap Course List)
An aluminum pole for a street light weighs 4600 N and supports an arm that weighs 660 N (see figure). The cente...
Mechanics of Materials (MindTap Course List)
True or False? Some manufacturers recommend the use of heavy oil in the transaxie; others may recommend the use...
Automotive Technology: A Systems Approach (MindTap Course List)
Using MATLAB, create a table that shows the relationship between the units of pressure in Pa and psi in the ran...
Engineering Fundamentals: An Introduction to Engineering (MindTap Course List)
State whether the following are true or false. a. Aeolian soils are transported and deposited by wind. b. Marbl...
Fundamentals of Geotechnical Engineering (MindTap Course List)
What benefits can be achieved through the successful implementation of EHRs? What additional benefits will be g...
Principles of Information Systems (MindTap Course List)
How can security be both a project and a process?
Management Of Information Security
A debate is raging at the IT consulting firm where you work. Some staff members believe that it is harder for e...
Systems Analysis and Design (Shelly Cashman Series) (MindTap Course List)
In Figure 402, approximately what is the percentage of current drawn from the line when the field current is ad...
Electric Motor Control
What would be three good uses for methane collected from a landfill?
Solid Waste Engineering
Repeat Problem 2.11 with the following data. 2.11 The grain-size characteristics of a soil are given in the fol...
Principles of Geotechnical Engineering (MindTap Course List)
When a force F acts on a linear spring, the elongation x of the spring is given by F = kx, where k is called th...
International Edition---engineering Mechanics: Statics, 4th Edition
When Type NM cable is run through a floor, it must be protected by at least ______ in. (_____ mm) of ________
EBK ELECTRICAL WIRING RESIDENTIAL
Find the expansion work resulting when the volume of a gas increases from 1 ft3 to 5 ft3 against a constant pre...
Fundamentals of Chemical Engineering Thermodynamics (MindTap Course List)
What do varnish or gum deposits on the dipstick indicate?
Automotive Technology
Determine the maximum service load that can be applied if the live load-to-dead load ratio is 3.0. Investigate ...
Steel Design (Activate Learning with these NEW titles from Engineering!)
Cash and Other Items The following information has been extracted from Atwood Corporations at accounting record...
Intermediate Accounting: Reporting And Analysis
Impact of Increased Sales on Operating Income Using the Degree of Operating Leverage Chillmax Company had plann...
Managerial Accounting: The Cornerstone of Business Decision-Making
Give an example of a slide and an example of a transposition. Explain how you might decide whether an error is ...
College Accounting (Book Only): A Career Approach
On August 1, Cairle Companys work-in-process inventory consisted of three jobs with the following costs: During...
Cornerstones of Cost Management (Cornerstones Series)
Explain how general controls impact transaction integrity and the financial reporting process.
Accounting Information Systems
What is the purpose of Form 941? How often is it prepared, and what are the due dates?
College Accounting (Book Only): A Career Approach
What is the purpose of Form 941, Employers Quarterly Federal Tax Return?
College Accounting, Chapters 1-27
Stock investment transactions, trading securities Zeus Investments Inc. is a regional investment company that b...
Accounting (Text Only)
A printing press priced at a fair market value of 275,000 is acquired in a transaction that has commercial subs...
Financial Accounting
Cost of goods sold and related items The following data were extracted from the accounting records of Harkins C...
Corporate Financial Accounting
Evaluating divisional performance The three divisions of Dixie Foods are Cereal, Produce, and Snacks. The divis...
Survey of Accounting (Accounting I)
When a note payable is paid at maturity, what account is debited for the amount of the interest? (a) Interest R...
College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)
The cash payments and purchases journals for Outdoor Artisan Landscaping follow. The accounts payable control a...
Financial Accounting
Lake Community College gives its faculty the option of receiving the balance of their contract at the end of th...
PAYROLL ACCT.,2019 ED.(LL)-TEXT
Continuing Problem The unadjusted trial balance of PS Music as of July 31, 2016, along with the adjustment data...
Financial & Managerial Accounting
Do you think your accounting education is preparing you effectively to practice accounting? Why or why not? Dis...
Pkg Acc Infor Systems MS VISIO CD
Define marketing research and explain its importance to marketing decision making
MKTG 12:STUDENT ED.-TEXT
By the time you are in college, you are in charge of at least some of your own finances. How well you manage yo...
Management, Loose-Leaf Version
If a straight-line demand curve slopes down, price elasticity will a. remain the same at all points on the dema...
Micro Economics For Today
In October 1999, Coca-Cola announced that it was considering testing a new vending machine that was temperature...
Exploring Economics
Answer the following: a. If TVC = 80 and AVC = 4, then what does quantity (Q) equal? b. If total cost is 40 whe...
Microeconomics
The file P13_22.xlsx contains total monthly U.S. retail sales data. While holding out the final six months of o...
Practical Management Science
As price declines, quantity demanded rises but quantity supplied does not change. Draw the supply and demand cu...
Macroeconomics
An economy consists of three workers: Larry, Moe, and Curly. Each works 10 hours a day and can produce two serv...
Essentials of Economics (MindTap Course List)
RETURN ON EQUITY Midwest Packagings ROH last year was only 3%; but its management has developed a new operating...
Fundamentals of Financial Management (MindTap Course List)
As shown in Exhibit A-7, if the market is in equilibrium, ____________ represents consumer surplus. a. ABEC b. ...
Economics For Today
Managing Supplier Quality: Integrated Devices Bill Edwards is a quality engineer assigned to the Injected Moldi...
Purchasing and Supply Chain Management
Explain how lower lending standards and lower interest rates can lead to higher house prices.
Economics (MindTap Course List)
Describe the three forms of behavioural segmentation.
Contemporary Marketing
COST OF EQUITY WITH AND WITHOUT FLOTATION Javits Sons common stock currently trades at 30.00 a share. It is ex...
Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)
The participation of women in the U.S. labor force has risen dramatically since 1970. a. How do you think this ...
Principles of Macroeconomics (MindTap Course List)
