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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:
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.
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Chapter A2 Solutions
Cornerstones of Financial Accounting
- Investments On October 4, 2019, Collins Company purchased 100 bonds of Steph Company for 6,400 as a short-term investment in securities classified as available for sale. On December 31, 2019, the bonds had a fair value of 6,300, and on February 8, 2020, Collins sold the bonds for 6,700. Required: In journal entry form, prepare the spreadsheet entries to record these transactions for Collins Companys 2019 and 2020 statement of cash flows.arrow_forwardRestricted Share Units On January 2, 2019, Dekker Company grants each of its 15 new employees 200 restricted share units. Each of the time-vested restricted share units entitles the employee to receive one share of Dekker common stock if they remain an employee of the company for 2 years. On January 2, 2019, shares of Dekkers 2 par value common are trading at 52 per share. Dekker estimates that 12 of the 15 employees will complete 2 years of service with the company. At the end of 2020, Dekker reported that four employees left the company before completing the service period. Required: 1. Prepare a schedule of Dekker s computations for its restricted share unit plan for 2019 and 2020 (round all computations to the nearest dollar). 2. Prepare all journal entries for the restricted share unit plan for 2019 and 2020.arrow_forwardWaseca Company had 5 convertible securities outstanding during all of 2019. It paid the appropriate interest (and amortized any related premium or discount using the straight line method) and dividends on each security during 2019. Each of the convertible securities is described in the following table: Additional data: Net income for 2019 totaled 119,460. The weighted average number of common shares outstanding during 2019 was 40,000 shares. No share options or warrants arc outstanding. The effective corporate income tax rate is 30%. Required: 1. Prepare a schedule that lists the impact of the assumed conversion of each convertible security on diluted earnings per share. 2. Prepare a ranking of the order in which each of the convertible securities should be included in diluted earnings per share. 3. Compute basic earnings per share. 4. Compute diluted earnings per share. 5. Indicate the amount(s) of the earnings per share that Waseca would report on its 2019 income statement.arrow_forward
Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning
Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning