North Ltd acquired $100,000 of shares in South Ltd for trading purposes on 1 January20X3. Transaction costs of $2,000 were incurred. The fair value of the shares at 31December 20X3 was $120, 500. Choose the account names and calculate the amountthat correctly account for this investment on 31 December 20X3 (amount for the creditentry is not required).

In investment accounting intention of the buyer will decide the accounting treatment of the…

Answered: North Ltd acquired $100,000 of shares…

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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On July 1, X6, Influence Ltd. paid $100,000 to acquire 1,000 common voting shares of Associés Ltd., representing a 30% interest. Associé Ltée declares dividends of $1 per share on December 1, X6. The JV of Associate's shares as of December 31, X6, is $115. The profit generated by Associate during the last 6 months of X6 amounts to $240,000. Determine the gain or loss on the disposition of the shares by assuming that Influence Ltée sells 500 shares of Associé Ltée on December 31, X6 for an amount of $200 per share. Question 4 options: $14,000 $50,000 none of the above $14,500 $42,500
Prepare entries to record both the acquisition and the sale of these shares. 1. On May 20, Montero Company paid $198,000 to acquire 70 shares (5%) of ORD Corporation as a long-term investment. 2. On August 5, Montero sold one-tenth of the ORD shares for $22,000.
Company A purchased a certain number of Company B's outstanding voting shares at $25 per share as a long-term investment. Company B had outstanding 32,000 shares of $12 par value stock. Complete the following table relating to the measurement and reporting by Company A after acquisition of the shares of Company B stock. Required: a. What level of ownership by Company A of Company B is required to apply the method? b. What events should cause Company A to recognize revenue related to the investment in Company B? c. After the acquisition date, how should Company A change the balance of the investment account with respect to the stock owned in Company B (other than for the disposal of the investments)? Additional information: Net income reported by Company B in the first year Dividends declared by Company B in the first year Market price of Company B stock at the end of the first year d. At acquisition, the investment account on the books of Company A should be debited for what amount? e.…
On January 2, Cohan Company acquired 40% of the outstanding stock of Sanger Company for $677,000. For the year ended December 31, Sanger Company earned income of $149,000 and paid dividends of $27,500. Prepare the entries for Cohan Company for the purchase of the stock, the share of Sanger income, and the dividends received from Sanger Company. Refer to the Chart of Accounts for exact wording of account titles.
n January 1, Puckett Company paid $1.28 million for 64,000 shares of Harrison’s voting common stock, which represents a 40 percent investment. No allocation to goodwill or other specific account was made. Significant influence over Harrison is achieved by this acquisition and so Puckett applies the equity method. Harrison distributed a dividend of $2 per share during the year and reported net income of $569,000. What is the balance in the Investment in Harrison account found in Puckett’s financial records as of December 31? What I have: Equity Investment 1.28 million Cash 1.28 million Equity Invetment 227600 Equity income 227600 Not sure how to record the $2 per dividend? What is the balance in the Investment in Harrison account found in Puckett’s financial records as of December 31?
Bellows Inc. purchased 10,000 shares of Nesbitt Inc.’s common stock for $7.50 per share. Nesbitt Inc. has 100,000 shares of common stock outstanding. What account and amount is debited by Bellows Inc. to record the investment in Nesbitt Inc.? Assuming that Nesbitt Inc. paid a dividend of $0.40 per share, what account and amount is credited by Bellows Inc. to record the receipt of the dividend? 3 If Bellows Inc. sold 4,000 shares of Nesbitt Inc.’s common stock for $9.00 per share, how much gain on the investment would Bellows Inc. recognize?
Instructions At a total cost of $6,950,000, Herrera Corporation acquired 229,500 shares of Tran Corp. common stock as a long-term investment. Herrera Corporation uses the equity method of accounting for this investment. Tran Corp. has 850,000 shares of common stock outstanding, including the shares acquired by Herrera Corporation. Required: A. Journalize the entries by Herrera Corporation on December 31 to record the following information (refer to the Chart of Accounts for exact wording of account titles): 1. Tran Corp. reports net income of $974,000 for the current period. 2. A cash dividend of $0.28 per common share is paid by Tran Corp. during the current period. B. Why is the equity method appropriate for the Tran Corp. investment?
On January 1, Sohar Corporation purchased a 25% equity in Salalah Corporation for $120,000. At December 31, Salalah declared and paid a $50,000 cash dividend and reported net income of $250,000. Instructions (a) Journalize the transactions. (b) Determine the amount to be reported as an investment in Salalah stock at December 31.
On 1 July 2021, Mel Ltd took control of the assets and liabilities of Syd Ltd. At this date the statement of financial position of Syd Ltd was as follows: Required Prepare the journal entries in the records of Mel Ltd at 1 July 2021 in each of the following situations, assuming the costs of issuing the shares by Mel Ltd cost $1600. Mel Ltd issued 80 000 shares having a fair value of $2.40 per share in exchange for the net assets of Syd Ltd Mel Ltd issued 80 000 shares having a fair value of $2.00 per share in exchange for the net assets of Syd Ltd. Mel Ltd acquired the shares of Syd Ltd. The agreement was that Mel Ltd would pay the shareholders of Syd Ltd one share in Mel Ltd for every two shares held in Syd Ltd plus $1 in cash for each share held in Syd Ltd. Shares in Mel Ltd have a fair value of $1.80 per share.
22,000 shares reacquired by Sunland Corporation for $50 per share were exchanged for undeveloped land that has an appraised value of $1,630,000. At the time of the exchange, the common stock was trading at $57 per share on an organized exchange. (a) Prepare the journal entry to record the acquisition of land assuming that the purchase of the stock was originally recorded using the cost method. (List all debit entries before credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Account Titles and Explanation Debit Credit
Adam Company Limited was incorporated on 1st April to take over as from 1st January in the same year the existing business of Bijoy Brothers. Under the take over agreement all profits made from 1st January are to belong to the Company. The purchase consideration was $ 7,00,000. The vendors received half of it in cash on 1st July in the same year together with interest at 10 per cent per annum. For other half of the purchase consideration, they were allotted 3,500 fully paid up shares of 100 each in the Company. Following balances appeared in the Company's Ledger as at 31st December : 2$ 12,000 48,000 13,000 7,000 3,000 22,000 10,400 17,500 7,70,000 9,10,000 3,100 Share Capital:4,500 shares of $ 100 each fully paid (including vendors' shares) Bank Overdraft Cash on Hand Salaries and Wages Rent Received 4,50,000 1,65,000 Rates and Taxes 65,000 Repairs to Building 35,000 50,000 1,30,000 15,000 35,000 4,20,00 95,000 Sundry Creditors Fixed Deposits Received Freehold Land at Cost…
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…

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