Norfolk Company, a broadcasting media in Hampton Roads, was seeking to gain a expansion in Virginia Beach. Toward that end, the company bought 10% of the outstanding common shares of Virginia Beach Magazine, Inc., on January 1, 2021, for $600,000. At the date of purchase, the book value of Virginia Beach's net assets was $5,000,000. The book values and fair values for all balance sheet items were the same except for land and building. The fair value exceeded book value by $200,000 for the land and by 800,000 million for the building. The estimated useful life of the building is 40 years. Virginia Beach Magazine reported net income of $ 240,000 for the year ended December 31, 2021. Virginia Beach Magazine paid a cash dividend of in total $80,000. According to the news posted on Wall Street Journal, Virginia Beach Magazine, Inc., was worthy as much as $6,100,000 (fair value) in the market on December 31, 2021. Required: Based on the information above, what method (equity, fair value, or consolidation method) should Norfolk Company use to account for this investment? Prepare the journal entry at the initial purchase date on January 1, 2021. Prepare the journal entry to recognize the cash dividends. ) Prepare any journal entry necessary on December 31, 2021 when Virginia Beach Magazine reported net income. If no journal entry is needed, please indicate “no journal entry necessary”. Prepare any journal entry necessary on December 31, 2021 when market value of Lavery’s common stock was $30. If no journal entry is needed, please indicate “no journal entry necessary”. Prepare any journal entry necessary on December 31, 2021 if further adjustments are needed for the difference between fair value and book value of Virginia Beach Magazine’s land and building. If no journal entry is needed, please indicate “no journal entry necessary”. What’s the balance of investment in Virginia Beach Magazine reported in Norfolk Company’s balance sheet on Dec 31, 2021? Prepare any adjusting entry if needed.

Norfolk Company, a broadcasting media in Hampton Roads, was seeking to gain a expansion in Virginia Beach. Toward that end, the company bought 10% of the outstanding common shares of Virginia Beach Magazine, Inc., on January 1, 2021, for $600,000. At the date of purchase, the book value of Virginia Beach's net assets was $5,000,000. The book values and fair values for all balance sheet items were the same except for land and building. The fair value exceeded book value by $200,000 for the land and by 800,000 million for the building. The estimated useful life of the building is 40 years. Virginia Beach Magazine reported net income of $ 240,000 for the year ended December 31, 2021. Virginia Beach Magazine paid a cash dividend of in total $80,000. According to the news posted on Wall Street Journal, Virginia Beach Magazine, Inc., was worthy as much as $6,100,000 (fair value) in the market on December 31, 2021. Required: Based on the information above, what method (equity, fair value, or consolidation method) should Norfolk Company use to account for this investment? Prepare the journal entry at the initial purchase date on January 1, 2021. Prepare the journal entry to recognize the cash dividends. ) Prepare any journal entry necessary on December 31, 2021 when Virginia Beach Magazine reported net income. If no journal entry is needed, please indicate “no journal entry necessary”. Prepare any journal entry necessary on December 31, 2021 when market value of Lavery’s common stock was $30. If no journal entry is needed, please indicate “no journal entry necessary”. Prepare any journal entry necessary on December 31, 2021 if further adjustments are needed for the difference between fair value and book value of Virginia Beach Magazine’s land and building. If no journal entry is needed, please indicate “no journal entry necessary”. What’s the balance of investment in Virginia Beach Magazine reported in Norfolk Company’s balance sheet on Dec 31, 2021? Prepare any adjusting entry if needed.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Virginia Beach Magazine reported net income of $ 240,000 for the year ended December 31, 2021. Virginia Beach Magazine paid a cash dividend of in total $80,000. According to the news posted on Wall Street Journal, Virginia Beach Magazine, Inc., was worthy as much as $6,100,000 (fair value) in the market on December 31, 2021.

Required:

Based on the information above, what method (equity, fair value, or consolidation method) should Norfolk Company use to account for this investment?
Prepare the journal entry at the initial purchase date on January 1, 2021.
Prepare the journal entry to recognize the cash dividends. )
Prepare any journal entry necessary on December 31, 2021 when Virginia Beach Magazine reported net income. If no journal entry is needed, please indicate “no journal entry necessary”.
Prepare any journal entry necessary on December 31, 2021 when market value of Lavery’s common stock was $30. If no journal entry is needed, please indicate “no journal entry necessary”.
Prepare any journal entry necessary on December 31, 2021 if further adjustments are needed for the difference between fair value and book value of Virginia Beach Magazine’s land and building. If no journal entry is needed, please indicate “no journal entry necessary”.
What’s the balance of investment in Virginia Beach Magazine reported in Norfolk Company’s balance sheet on Dec 31, 2021? Prepare any adjusting entry if needed.

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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