Gioia Company acquired some ofthe 65,000 shares of outstandingcommon stock (no par) ofTristezza Corporation during thecurrent year as a long-terminvestment. The annualaccounting period for bothcompanies ends December 31.The following transactionsoccurred during the current year:Jan. 10 Purchased 17,875 sharesof Tristezza common stock at $11per share. Dec. 31 a. Received thecurrent year financial statementsof Tristezza Corporation thatreported net income of $80,000.b. Tristezza Corporation declareda cash dividend of $0.60 pershare. c. Tristezza Corporationpaid the cash dividend declared in(b). d. Determined the marketprice of Tristezza stock to be $10per share. Required: 2. Preparethe journal entries for each ofthese transactions. (If no entry isrequired for a transaction/event,select "No journal entry required"in the first account field.)

1. Jan. 10 - Purchase of Tristezza StockGioia purchased 17,875 shares of Tristezza Corporation's…

Answered: Gioia Company acquired some of the…

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter13: Investments And Long-term Receivables

Section: Chapter Questions

Problem 14RE

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Felicia Company acquired 21,000 of the 60,000 shares of outstanding common stock of NuecesCorporation as a long-term investment. The annual accounting period for both companies endsDecember 31. The following transactions occurred during the year:Jan. 10 Purchased 21,000 shares of Nueces common stock at $12 per share.Dec. 31 Nueces Corporation reported net income of $90,000.Dec. 31 Nueces Corporation declared and paid a cash dividend of $0.60 per share.Dec. 31 Determined the fair value of Nueces stock to be $11 per share.Required:1. What accounting method should the company use? Why?2. Give the journal entries for each of these transactions. If no entry is required, explain why.3. Show how the long-term investment and the related revenue should be reported on the financial statements of Felicia Company.
Spartan Corporation redeemed 25 percent of its shares for $2.700 on July 1 of this year, in a transaction that qualified as an exchange under IRC $302(a). Spartan's accumulated E&P at the beginning of the year was $2,700. Its current E&P is $19,900. Spartan made dividend distributions of $2,400 on June 1 and $6,600 on August 31. Determine the beginning balance in Spartan's accumulated E&P at the beginning of the next year. See Revenue Rules 74-338 and 74-339 for help in making this calculation. (Round your intermediate calculations to the nearest whole dollar amount.) Accumulated E&P at the beginning of the next year
Clark Company acquired 15% of the 500,000 shares of common stock of Davis Company at a total cost of $25.75 per share on June 1, 2025. On October 1, Davis Company declared and paid a $50,000 cash dividend. On December 31, Davis Company stock had a market price of $27.00 per share and the company reported net income of $1,250,000 for the year. The securities are classified as trading. Prepare all journal entries for 2025. June 1 Oct 1 Dec 31 Use the information above: Assume Clark Company acquired 40% of the shares of Davis Company. June 1 Oct 1 Dec 31
Spartan Corporation redeemed 25 percent of its shares for $1,800 on July 1 of this year, in a transaction that qualified as an exchange under IRC §302(a). Spartan’s accumulated E&P at the beginning of the year was $1,800. Its current E&P is $16,300. Spartan made dividend distributions of $2,700 on June 1 and $6,000 on August 31. Determine the beginning balance in Spartan’s accumulated E&P at the beginning of the next year. See Revenue Rules 74-338 and 74-339 for help in making this calculation. (Round your intermediate calculations to the nearest whole dollar amount.)
On 5/1/X2 , Pixco issued shares of its voting common stock in exchange for 60% of Stixco's outstanding common stock as a business combination appropriately accounted for under the purchase method. Both companies have a December 31 year-end. Selected information for each company follows: 14. Pixco Stixco Net income from own separate operations (exclusive of earnings recorded under either the equity method or the cost method): 4 months ended 4/30/X. 8 months ended 12/31/X $2,000,000 $200,000 6,000,000 $8,000,000 500,000 $700,000 Dividends declared: 4 months ended 4/30/X. 8 months ended 12/31/Xa. $ 900,000 $100,000 2,000,000 $2,900,000 300,000 $400,000 Parent's recorded amortization of $70,000 cost in excess of book value for 101. What is the parent's net income for 101 under the equity method? a. $8,230,000 b. $8,350,000 C. $8,410,000 d. $8,480,000 e. None of the above.
On February 1. Mini Company purchased 1.000 shares (2% ownership) of Win Company common stock for $30 per share. The shares are classified as a short-term investment. On March 20, Mini Company sold 200 shares of Win stock for $5,800. Mini received a dividend of $1 per share on April 25. The fair value of the remaining stock is $26,400 on June 30. The entry to record the appropriate fair value adjustment on June 30 would include a debit to O Urealzed Gain or Lass - Income in the amount of $2,400. 57 167 points O Fair Value Adjustment -Stock in the amount of $2.400. O Unrealized Gain or Loss -Income in the amount of $3,600. O No gain or loss should be recorded because no adlitional shares were sold on June 30. 58 L66 points The Norfolk Pine Co purchased 10.000 shares of Peperomia Ginny, Inc. on July 1 at a cost of $18 per share. On December 1, Norfolk Pine sells 600 shares at a price of $20 per share. Norfolk Pine's entry to record this transaction will include a 0 debit to Common Stock…
Cullumber Company acquired 28% of the outstanding common stock of Grinwold Inc. on January 1, 2020, by paying $1,555,400 for 55,550 shares. Grinwold declared and paid a $0.50 per share cash dividend on June 30 and again on December 31, 2020. Grinwold reported net income of $859,200 for the year. (a) Your Answer Correct Answer Prepare the journal entries for Cullumber Company for 2020, assuming Cullumber cannot exercise significant influence over Grinwold. (Use the cost method.) (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.) (b) Your answer is partially correct. Date Jan. 1 June 30 Dec. 31 Solution List of Accounts Jan. 1 (c2) Date June 30 eTextbook and Media Dec. 31 Dec. 31 Account Titles and Explanation V Stock Investments Your answer is correct. Cash Prepare the journal entries for Cullumber Company for 2020, assuming Cullumber can exercise significant influence over…
Brinkley Company, which began operations in Year 1, had the following transactions and events in its long-term investments. Year 1 Jan. 5 Brinkley purchased 20,000 shares (25% of total) of Bloch’s common stock for $200,500. Aug. 1 Bloch declared and paid a cash dividend of $1.05 per share. Dec. 31 Bloch’s net income for the year is $82,000, and the fair value of its stock is $11.90 per share. Year 2 Aug. 1 Bloch declared and paid a cash dividend of $1.35 per share. Dec. 31 Bloch’s net income for the year is $78,000, and the fair value of its stock is $13.65 per share. Year 3 Jan. 8 Brinkley sold 5% (equal to 1,000 shares) of its investment in Bloch for $12,025 cash. Required Prepare journal entries to record these transactions and events for Brinkley. Assume that Brinkley has a significant influence over Bloch with its 25% share.
kayend Corporation purchases 85% of Subil Products' common stock. Assume that Kayend already recorded the acquisition on January 1, 20X1. During the year, Kayend reports operating earnings of $450,000, excluding its income from investing in Subil, and declares dividends of $70,000. Subil reports 20X1 net income of $50,000 and declares dividends of $30,000. Which of the following is Kayend's journal entry to record its share of Subil's income? Debit Noncontrolling Interest for $42,500; Credit Cash for $42,500 Debit Investment in Subil Products for $42,500; Credit Cash for $42,500 Debit Cash for $42,500; Credit Noncontrolling Interest for $42,500 Debit Investment in Subil Products for $42,500; Credit Income from Subil Products for $42,500
ABC Co. reports under IFRS and has a December 31st year end. On January 1, 2020, ABC Co. purchased 3000 shares (30%) of the outstanding common shares of XYZ Inc. for $28/share in cash. XYZ Inc. provided the following statement of comprehensive income for the year ended Dec 31, 2020: Net income $22,500 Other comprehensive income 600 Comprehensive income $23,100 XYZ Inc. paid dividends of $1.20 per share during the year. Due to recent uncertainty in XYZ’s industry, shares were trading at $26.50 per share at year end. ABC CO.'s accountant is still investigating whether it will need to classify the investment as an investment in associate or FVTOCI. Required: a. Prepare the 2020 journal entries for ABC Co for the investments assuming the investment is classified as : i) investment in associate (equity method) ii) FVTOCI b. Calculate the value of the investment in XYZ Inc on the balance sheet of ABC Co. at December 31, 2020 as classified as: i) investment in…
At the beginning of the current year, an entity acquired 40% of the ordinary shares of an associate. On such date, assets and liabilities of the investee were recorded at fair value and the acquisition showed that goodwill of P1,000,000 was acquired. The investee reported net income of P8,000,000 for the current year. In December, the investee sold inventory costing P3,000,000 to the investor for P5,000,000. The inventory remained unsold by the investor at year-end. At the beginning of the current year, the investee sold equipment to the investor with a carrying amount of P2,500,000 for P4,000,000. The remaining life of the equipment is 5 years. What amount of investment income should be reported for the current year? a. 1,920,000 b. 1,800,000 c. 3,200,000 d. 2,400,000 Problem 4 An entity owned 100% of another entity’s preference shares and 20% of ordinary shares. The investee’s share capital outstanding at year-end included P5,000,000 of 10% cumulative preference…
Sunland Corporation purchased 370 shares of Sherman Inc. common stock for $ 13,100 ( Sunland does not have significant influence). During the year, Sherman paid a cash dividend of $ 3.00 per share. At year-end, Sherman stock was selling for $ 37.50 per share.Prepare Sunland's journal entries to record (a) the purchase of the investment, (b) the dividends received, and (c) the fair value adjustment. (Assume a zero balance in the Fair Value Adjustment account.) (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) No. Account Titles and Explanation Debit Credit (a) enter an account title to record the purchase of the investment enter a debit amount enter a credit amount enter an account title to record the purchase of the investment enter a debit amount enter a credit amount (b) enter an account title to record…

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