Advanced Accounting
12th Edition
ISBN: 9781305084858
Author: Paul M. Fischer, William J. Tayler, Rita H. Cheng
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 3, Problem 3.3.2P
To determine
There is various method of calculating Parent company’s investment balance at the end of the first year. Some are
- Simple Equity Method
- Sophisticated Equity Method
- Cost Method
To Calculate
To record the investment as per the method sophisticated equity method.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
(Equity Investment) On July 1, 2017, Selig Company purchased for cash 30% of the outstanding common stock of Spoor Corporation. Both Selig and Spoor have a December 31 year-end. Spoor Corporation, whose common stock is actively traded on the NASDAQ exchange, paid a cash dividend on November 15, 2017, to Selig Company and its other stockholders. It also reported its total net income for the year of $920,000 to Selig Company.InstructionsPrepare a one-page memorandum of instructions on how Selig Company should report the above facts in its December 31, 2017, balance sheet and its 2017 income statement. In your memo, identify and describe the method of valuation you recommend.Provide rationale where you can. Address your memo to the chief accountant at Selig Company
8. Stetson Corporation uses the equity method to ac-
count for its ownership of 30% of the common stock
of Pike Packing. During 2017, Pike reported a net in-
come of $80,000 and declares and pays cash dividends
of $10,000. What recognition should Stetson Corpora-
tion give to these events?
3. On January 10, 2012 Badger Co. purchased 30% of the outstanding stock of Crest Co.
for $123,000. Crest paid total dividends to all shareholders of $15,000 on July 15. crest
had a net loss of $25,000 for 2012
a. Journalize Badger's purchase of the stock, receipt of dividend and adjusting entry
for the equity loss in Crest Co. Stock.
b. Compute the balance of investment in Crest CO. Stock for December 31, 2012.
Chapter 3 Solutions
Advanced Accounting
Ch. 3 - Prob. 1UTICh. 3 - Prob. 2UTICh. 3 - Prob. 3UTICh. 3 - Prob. 4UTICh. 3 - Prob. 5UTICh. 3 - Prob. 6UTICh. 3 - Prob. 7UTICh. 3 - Prob. 1ECh. 3 - Prob. 2ECh. 3 - Prob. 3.1E
Ch. 3 - Prob. 3.2ECh. 3 - Prob. 3.3ECh. 3 - Prob. 3.4ECh. 3 - Prob. 3.5ECh. 3 - Equity method, second year, eliminations, income...Ch. 3 - Prob. 4.2ECh. 3 - Prob. 5.1ECh. 3 - Prob. 5.2ECh. 3 - Prob. 5.3ECh. 3 - Prob. 5.4ECh. 3 - Prob. 5.5ECh. 3 - Prob. 6.1ECh. 3 - Prob. 6.2ECh. 3 - Prob. 7.1ECh. 3 - Prob. 7.2ECh. 3 - Prob. 7.3ECh. 3 - Prob. 7.4ECh. 3 - Prob. 7.5ECh. 3 - Prob. 8.1ECh. 3 - Prob. 8.2ECh. 3 - Prob. 9ECh. 3 - Prob. 10.1ECh. 3 - Prob. 10.2ECh. 3 - Prob. 10.3ECh. 3 - Prob. 11ECh. 3 - Prob. 3B.1.1AECh. 3 - Prob. 3B.1.2AECh. 3 - Prob. 3B.1.3AECh. 3 - Prob. 3B.2.1AECh. 3 - Prob. 3B.2.2AECh. 3 - Prob. 3B.3AECh. 3 - Prob. 3.1.1PCh. 3 - Prob. 3.1.2PCh. 3 - Prob. 3.1.3PCh. 3 - Prob. 3.2.1PCh. 3 - Prob. 3.2.2PCh. 3 - Prob. 3.3.1PCh. 3 - Prob. 3.3.2PCh. 3 - Prob. 3.3.3PCh. 3 - Prob. 3.3.4PCh. 3 - Prob. 3.4.1PCh. 3 - Prob. 3.4.2PCh. 3 - Prob. 3.5.1PCh. 3 - Prob. 3.5.2PCh. 3 - Prob. 3.5.3PCh. 3 - Prob. 3.6.1PCh. 3 - Prob. 3.6.2PCh. 3 - Prob. 3.6.3PCh. 3 - Prob. 3.7.1PCh. 3 - Prob. 3.7.2PCh. 3 - Prob. 3.7.3PCh. 3 - Prob. 3.8.1PCh. 3 - Prob. 3.8.2PCh. 3 - Prob. 3.9.1PCh. 3 - Prob. 3.9.2PCh. 3 - Prob. 3.10.1PCh. 3 - Prob. 3.10.2PCh. 3 - Prob. 3.11.1PCh. 3 - Prob. 3.11.2PCh. 3 - Prob. 3.12.1PCh. 3 - Prob. 3.12.2PCh. 3 - Prob. 3.13.1PCh. 3 - Prob. 3.13.2PCh. 3 - Prob. 3.15.1PCh. 3 - Prob. 3.15.2PCh. 3 - Prob. 3.16.1PCh. 3 - Prob. 3.16.2PCh. 3 - Prob. 3.17.1PCh. 3 - Prob. 3.17.2PCh. 3 - Prob. 3.18.1PCh. 3 - Prob. 3.18.2PCh. 3 - Prob. 3A.1.1APCh. 3 - Prob. 3A.1.2APCh. 3 - Prob. 3A.2APCh. 3 - Prob. 3A.3APCh. 3 - Prob. 3B.1APCh. 3 - Prob. 3B.2APCh. 3 - Prob. 3B.3.1APCh. 3 - The trial balances of Campton Corporation and Dorn...Ch. 3 - The trial balances of Campton Corporation and Dorn...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Jeter Corporation purchases 80% of the outstanding stock of Super Company for $275,000 on July 1, 2015. Super Company has the following stockholders’ equity on July 1, 2015:Common stock ($5 par). . . . . . . . . . . . . . . . . . . . . . . . . $150,000Retained earnings, July 1, 2015 . . . . . . . . . . . . . . . . . . 50,000Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $200,000The fair values of Super’s assets and liabilities agree with the book values, except for the equipment and the building. The equipment is undervalued by $10,000 and is thought to have a 5-year life; the building is undervalued by $50,000 and is thought to have a 20-year life. The remaining excess of cost over book value is attributable to goodwill. Jeter Corporation uses the simple equity method to record its investments. Since the purchase date, both firms have operated separately, and no intercompany transactions have occurred. Super Company closes its books on the date of…arrow_forwardOn March 22, 2023, Amelia, Inc., purchased 500 shares of its own common stock in the market for $21 per share. On May 19, 2023, the company sold 300 of these shares in the open market at a price of $24 per share. Required: Use the horizontal model (or write the entry) to show the effects on Amelia, Inc.'s financial statements of: a). The purchase of the treasury stock on March 22, 2023. The sale of the treasury stock on May 19, 2023. b).arrow_forwardC. Prepare the journal entries for this transactions Peterson Company issued 4,000 shares of preferred stock for $240,000.The stock has a par value of $60 per share. On December 2, 2014, Ewell Company purchases a piece of land from the original owner. In payment for the land, Ewell Company issues 8,000 shares of common stock with $1.00 par value. The land has been appraised at a market value of $400,000. Chaney Corporation issued 20,000 shares of common stock on January 1, 2014. The stock has par value of $1.00 per share and was sold at $30 per share. Bradley Corporation issued 10,000 shares of common stock on January 1, 2013. The stock has par value of $0.01 per share and was sold at $25 per share.arrow_forward
- 2. In January 2018, the management of ABC Company concludes that it has sufficient cash to purchase some short-term investments in bonds and shares. During the year, the following transactions occurred. Feb. 1 Purchased 500 shares of DET shares for 45,000TL. Mar. 1 Purchased 600 shares of STL shares for 30,000TL. Mar.25 DET declared 0.90TL dividends per share payable on September 1. June 1 Purchased 40 1,000TL 9% CTN bonds for 60,000TL. Interest is payable semiannually on June 1 and November 1. July 1 Sold 200 shares of DET and collected totally 19,880TL. Aug. 1 Received a 1.5TL per share cash dividend on the STL shares. Sept. 1 Received cash dividend on DET shares. Oct. 1 Sold 20 CTN bonds and collected totally 25,750TL. Nov. 1 Received the semiannual interest on CTN bonds. Required: Journalize and post the transactions.arrow_forwardHello! I need help with the following accounting problem: Bramble Inc. obtained significant influence over Kasey Corporation by buying 25% of Kasey's 32,700 outstanding shares of common stock at a total cost of $10 per share on January 1, 2022. On June 15, Kasey declared and paid a cash dividend of $31,600. On December 31, Kasey reported a net income of $116,000 for the year. Prepare all the neccesary journal entries for 2022 for Bramble inc. Thank you!arrow_forwardon 1/1/20, ABC Corp bought 500 shares of XYZ Corp for $10,000. XYZ Corp has 25,000 shares outstanding. on 6/1/20, XYZ pays a $100,000 cash dividend to all shareholders. On 12/31/20, XYZ is trading at $22/share and during 2020 XYZ reported net income of $250,000. What is the total effect on net income for ABC from this investment? Assume ABC reports annually on a calendar year basis.arrow_forward
- 3. On Oct. 31, 2017, Claire company declared property dividend to be paid on March 31, 2018. The property declared as dividend is the 20,000 shares of equity securities it owned from LIM company with carrying amount of P90 per share. These shares have a quoted price of P130 on Oct. 31, 2017, P150 on December 31, 2017 and P110 on March 31, 2018. 1. On December 31, 2017, what amount of property dividends payable will bepresented in the liability section of the statement of financial position? 2. What amount of retained earnings has been charged to give effect to this dividend?arrow_forward3. On Oct. 31, 2017, Claire company declared property dividend to be paid on March 31, 2018. The property declared as dividend is the 20,000 shares of equity securities it owned from LIM company with carrying amount of P90 per share. These shares have a quoted price of P130 on Oct. 31, 2017, P150 on December 31, 2017 and P110 on March 31, 2018.a. Prepare the pertinent entries on Oct. 31, 2017, December 31, 2017 and March 31, 2018.arrow_forwardOn October 1, 2015, Adoll Company acquired 1,000 shares of its $1 par value stock for $44 per share and held these shares in treasury. On March 1, 2017, Adoll resold all of the treasury shares for $40 per share. Which of the following entries would be recorded when Adoll Company resells the shares of treasury stock? A- Debit Cash $40,000; Debit Loss on Sale of Treasury Stock $4,000; Credit Treasury Stock $44,000 B- Debit Cash $40,000; Debit Additional Paid In Capital $4,000; Credit Common Stock $44,000 C- Debt cash $40,000; Debit Additional Paid in Capital $4,000; Credit Treasury Stock $44,000 D- Debit Cash $40,000' Credit Common Stock $1,000; Credit Additional Paid In Capital $39,000arrow_forward
- The following information relates to Crip Crippy Investment of HIJ Corporation. (1). Purchase investment for $1,000,000 on January 1, 2009 (2) HIJ Corporation had earnings of $600,00 at December 31, 2009 and declared dividends of $400,000. (3) The dividends were paid on January 2, 2010. (4) On July 1, 2010 Crip Crippy sold fifty percent of its interest for $ 400,000 (5) At June 30, 2010, HIJ had earnings of $600,000 for the year and paid dividends of $200,000 for shares outstanding as at November 30, 2010. Requiement: Using the cost and equity method, record all entries from January 1, 2009 to December 31, 2010 using the following scenarios (a) Crip Crippy purchased 40% of HIJ Corporation (b) Crip Crippy purchased 18% of HIJ Corporationarrow_forward(Give the exaplanation of formula and concept.do not provide plagarised content otherwise i dislike) Isle Royale Inc. bought 22,500 shares of the voting common stock of Lake Clark Company in January 2023. In December, Lake Clark Company announced $202,900 net income for 2023 and declared and paid a cash dividend of $8.00 per share on all 202,000 shares of its outstanding common stock. Calculate Isle Royale Inc.'s dividend revenue from Lake Clark Company in December 2023.○ $180,000○ $22,600○ $0○ $1,616,000arrow_forwardSteam Room Inc. (SRI) has 15,000 shares issued in total. Assume that on January 1, 2021, Omega Corporation acquired 35% of SRI's shares for $45 per share. Omega is assumed to have significant influence over SRI and will use the equity method to account for its investments. For the year ended December 31, 2021, SRI reported profit of $800,000 and declared and paid $50,000 in cash dividends. At December 31, 2021, SRI's common shares were traded at $50 each but dropped to $35 by January 31, 2022. The ending balance of Omega's investment account in SRI on December 31, 2021 is $525,000. $498,750. $533,750. O $560,000.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Financial AccountingAccountingISBN:9781305088436Author:Carl Warren, Jim Reeve, Jonathan DuchacPublisher:Cengage Learning
Financial Accounting
Accounting
ISBN:9781305088436
Author:Carl Warren, Jim Reeve, Jonathan Duchac
Publisher:Cengage Learning
Asset impairment explained; Author: The Finance Storyteller;https://www.youtube.com/watch?v=lWMDdtHF4ZU;License: Standard Youtube License