Change from the fair value method to the equity method Assume an investor company acquires for $300,000 an 10% investment in the common stock of an investee company on February 15, 2021. The investor determined the common stock of the investee has a readily determinable fair value. On December 31, 2021, the fair value of the 10% common stock investment is $320,000, and the investor company made made all of the appropriate adjustments in preparation of the annual financial statements. On March 1, 2022, the investor company acquires an additional 15% of common stock of the investee for $600,000, thereby increasing the investor's overall ownership interest to 25%. Required a. Prepare the journal entries the investor company should record on March 1, 2022. Note: If a journal entry is not required, select "Not applicable" as your answers for the drop-down options and leave the Debit and Credit answers blank (zero). Description Debit Credit To adult value of investment account # . to record the purchase of additional stock b. For this question orily, assume instead that the investor determined, on February 15, 2021, that the common stock of the investee does not have a readily determinable fair value. In addition, the investor company determined that the additional 15% common stock purchase on March 1, 2022 does qualify as an observable price change in orderly transaction Prepare the journal entries the investor company should record on March 1, 2022. Note: if a journal entry is not required, select "Not applicable" as your answers for the drop-down options and leave the Debit and Credit answers blank (zero). Description Credit # 0 0 0
Change from the fair value method to the equity method Assume an investor company acquires for $300,000 an 10% investment in the common stock of an investee company on February 15, 2021. The investor determined the common stock of the investee has a readily determinable fair value. On December 31, 2021, the fair value of the 10% common stock investment is $320,000, and the investor company made made all of the appropriate adjustments in preparation of the annual financial statements. On March 1, 2022, the investor company acquires an additional 15% of common stock of the investee for $600,000, thereby increasing the investor's overall ownership interest to 25%. Required a. Prepare the journal entries the investor company should record on March 1, 2022. Note: If a journal entry is not required, select "Not applicable" as your answers for the drop-down options and leave the Debit and Credit answers blank (zero). Description Debit Credit To adult value of investment account # . to record the purchase of additional stock b. For this question orily, assume instead that the investor determined, on February 15, 2021, that the common stock of the investee does not have a readily determinable fair value. In addition, the investor company determined that the additional 15% common stock purchase on March 1, 2022 does qualify as an observable price change in orderly transaction Prepare the journal entries the investor company should record on March 1, 2022. Note: if a journal entry is not required, select "Not applicable" as your answers for the drop-down options and leave the Debit and Credit answers blank (zero). Description Credit # 0 0 0
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Do not give answer in image
Transcribed Image Text:Note: If a journal entry is not required, select "Not applicable" as your answers for the drop-down options and leave the Debit and Credit answers blank (zero).
Description
Debit
Credit
To adjust value of investment account
2
To record the purchase of additional stock
c. For this question only, assume instead that the investor determined, on February 15, 2021, that the common stock of the investee does not have a readily determinable fair value, in
addition, the investor company determined that the additional 15% common stock purchase on March 1, 2022 does not qualify as an observable price change in orderly transaction
Prepare the journal entries the investor company should record on March 1, 2022.
To adjust value of investment account
Note: if a journal entry is not required, select "Not applicable" as your answers for the drop-down options and leave the Debit and Credit answers blank (zero)
Description
Debit
Credit
0
#
.
=
=
to record the purchase of additional stock
Please answer all parts of the question
0
0
D
0
Transcribed Image Text:Change from the fair value method to the equity method
Assume an investor company acquires for $300,000 an 10% investment in the common stock of an investee company on February 15, 2021. The investor determined the common stock
of the investee has a readily determinable fair value. On December 31, 2021, the fair value of the 10% common stock investment is $320,000, and the investor company made made all
of the appropriate adjustments in preparation of the annual financial statements. On March 1, 2022, the investor company acquires an additional 15% of common stock of the investee
for $600,000, thereby increasing the investor's overall ownership interest to 25%.
Required
a. Prepare the journal entries the investor company should record on March 1, 2022.
Note: If a journal entry is not required, select "Not applicable" as your answers for the drop-down options and leave the Debit and Credit answers blank (zero).
Description
Debit
Credit
To adult value of investment account
=
D
#
#
to record the purchase of additional stock
b. For this question orily, assume instead that the investor determined, on February 15, 2021, that the common stock of the investee does not have a readily determinable fair value. In
addition, the investor company determined that the additional 15% common stock purchase on March 1, 2022 does qualify as an observable price change in orderly transaction
Prepare the journal entries the investor company should record on March 1, 2022.
Note: if a journal entry is not required, select "Not applicable" as your answers for the drop-down options and leave the Debit and Credit answers blank (zero).
Description
Debit
Credit
0
0
0
O
0
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