On January 1, 2022, Oriole Corp. bought 28,000 shares of the available 100,000 common shares of Iceberg Inc., a publicly traded firm.This acquisition provided Oriole with significant influence. Oriole paid $722,000 cash for the investment. At the time of theacquisition, Iceberg reported assets of $2,493,000 and liabilities of $1,192,000. Asset values reflected fair market value, except forcapital assets that had a net book value of $505,000 and a fair market value of $753,000. These assets had a remaining useful life offive years. For 2022 Iceberg reported net income of $390,000 and paid total cash dividends of $100,000.On May 16, 2023, Oriole sold 14,000 of its shares in Iceberg for $425,000. Oriole has no immediate plans to sell its remaininginvestment in Iceberg.Iceberg is actively traded, and stock price information follows:January 1, 2022$29December 31, 2022$31January 1, 2023$32(a)Assuming Oriole is using the equity method under ASPE. did the initial investment include a payment for goodwill?Payment for goodwill$

Investments:The investment refers to the current assets which is money invested by the individual in…

Answered: (a) Assuming Oriole is using the equity…

(a) Assuming Oriole is using the equity method under ASPE, did the initial investment include a payment for goodwill? Payment for goodwill $

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: Is it necessary for an investor to report individual amounts for the three categories of…

A: Held-to-maturity security: The debt securities which are held by the investor with an intent to hold…

Q: According to the historical cost principle, assets are measured at the exchange price at the time…

A: Introduction: As per the historical cost principle is one of basic accounting principle, is a…

Q: If the value of an item can be measured and reasonably determined, this item can be recognized in…

A: An item can be recognized in the financial statement if it satisfies certain specified condition.…

Q: the inflows and outflows method, the following are considered exceptional inflows: A) Interest…

A: Inflows and outflows method specifies the process of evaluating all the desired cash that comes into…

Q: Your answer is partially correct. Prepare all entries required for 2024, including recognition of…

A: FV-NI stands for "Fair Value through Net Income." Accounting for securities under FV_NI is a method…

Q: Explain the Sale of HTM Investments.

A: Investment: It refers to the process of using the currently held excess cash to earn profitable…

Q: The underlying equity of an investment at acquisition: Question 6Answer a. Is recorded in the…

A: The accounting treatment of the underlying equity refers to the methods and principles applied in…

Q: hat is the amount realized in a transaction? The gain on the sale of an asset The proceeds less the…

A: Capital gain is realized from the sale of fixed assets.

Q: Is taxable interest income generated via active or passive investments, or through a portfolio of…

A: The Answer

Q: a) Prepare the journal entry to record Sarasota's investment in Washi. Assume that any unexplained…

A: Introduction: - Journal entry is the first stage of accounting process. Journal entry used to record…

Q: Collateral may mean the acquisition of rights over either assets belonging to a borrower and/or the…

A: Collateral is a financial concept that involves using assets as a form of security in lending and…

Q: The return on plan assets a.is the change in the fair value of the plan assets during the year. b.…

A: Introduction: A long-term employee benefit fund's plan assets are assets/investments kept for the…

Q: loses significant influence over the associate, the balance of the investment in the associate is…

A: When the company has significant influence over the associate, then equity method should be used for…

Q: On October 1, Novak Ltd. purchased 9% bonds with a face value of $1,000 for trading purposes,…

A: FV_NI stands for "Fair Value through Net Income." Accounting for securities under FV_NI is a method…

Q: The amount to be capitalized should be:

A: Answer: Option a.

Q: __ is a contract that involves compensation for specific potential future losses in exchange for…

A: Step 1 Currency swap forward contracts are frequently used by companies with international market…

Q: On the balance sheet date, the book value (or carrying value) of an asset should always equal the…

A: Book value of an asset is based on the cost of the asset and depreciation charged over time. ie,…

Question

On January 1, 2022, Oriole Corp. bought 28,000 shares of the available 100,000 common shares of Iceberg Inc., a publicly traded firm.
This acquisition provided Oriole with significant influence. Oriole paid $722,000 cash for the investment. At the time of the
acquisition, Iceberg reported assets of $2,493,000 and liabilities of $1,192,000. Asset values reflected fair market value, except for
capital assets that had a net book value of $505,000 and a fair market value of $753,000. These assets had a remaining useful life of
five years. For 2022 Iceberg reported net income of $390,000 and paid total cash dividends of $100,000.
On May 16, 2023, Oriole sold 14,000 of its shares in Iceberg for $425,000. Oriole has no immediate plans to sell its remaining
investment in Iceberg.
Iceberg is actively traded, and stock price information follows:
January 1, 2022
$29
December 31, 2022
$31
January 1, 2023
$32
(a)
Assuming Oriole is using the equity method under ASPE. did the initial investment include a payment for goodwill?
Payment for goodwill
$

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1: Define Investments:

VIEW

Step 2: Determine if the initial investment include a payment for goodwill:

VIEW

Solution

VIEW

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

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

Which of the following is an indirect investment? a) Joint venture b) Property loan c) REIT d) Asset purchase Please ensure accuracy and explain your choice
choose from the following accounts: Accumulated Other Comprehensive Income Allowance for Investment Impairment Bond Investment at Amortized Cost Cash Commission Expense Dividends Receivable Dividend Revenue FV-NI Investments FV-OC|Investments Gain on Disposal of Investments - FV-NI Gain on Disposal of Investments - FV-OCI Gain on Sale of Investments GST Receivable Interest Expense Interest Income Interest Payable Interest Receivable Investment in Associate Investment Income or Loss Loss on Discontinued Operations Loss on Disposal of Investments FV-NI Loss on Disposal of Investments FV-OCI Loss on Impairment Loss on Sale of Investments No Entry Note Investment at Amortized Cost Other Investments Recovery of Loss from Impairment Retained Earnings Unrealized Gain or Loss Unrealized Gain or Loss - OCI
How is the adjustment to fair value recorded differently for a cash flow hedge versus a fair value hedge? That is, how does the fair value adjustment of each type of hedge affect current period net income and the accounting equation?
The Equity Method of accounting for investments: a) Requires the investment asset to increase proportionally with the affiliates net income b) Requires the investment asset to decrease proportionally with the affiliates net loss c) Requires the investment asset to decrease proportionally with dividends received d) All of the above
What factors should be considered in determining the issue price of a debenture. and Provide some examples of items that would be adjusted directly against equity, rather than beingincluded as part of profit or loss.
Which of the following results in an increase in the Equity in the Investee Income acct. when applying the equity method? Amortizations of purchase price over book value on date of purchase Amortization since date of purchase of purchase price over book value on date of purchase Sale of portion of the investment at a gain to the investor Investors share of gross profit from intra-entity inventory sale for the prior year Sale of a portion of the investment at a loss
Which of the following are Assets, Liabilities, EquityAccounts PayableCommon StockBonds PayableFurniture and FixturesInventoryInterest PayableDividentsAdditional paid-in-capitalPatents and copyrightsShort-term investments
25. A parent company’s investment account would include an element which is representative of : Multiple Choice the unrecorded difference between fair value and book value of the investee’s assets. the unrecorded book value of the investor’s assets. the goodwill accrued since the purchase of the investee. the recorded current value of the investee’s assets.
2. Why are investments shown as a current asset?
On the balance sheet date, the book value (or carrying value) of an asset should always equal the asset's fair value. Select one: True False
show you work which of the following is not correct in regard to trading investments? a. They are held with the intention of selling them in a short period of time. b. Unrealized holding gains and losses are reported as part of net income. c. Any discount or premium is nott amortized d. All of these answer choices are correct.
What is the fair-value option for reporting equity method investments? How do the equity method and fair-value accounting differ in recognizing income from an investee?