On July 1, 2024, Clearwater Incorporated purchased 7,200 shares of the outstanding common stock of Mountain Corporation at a cost of $152,000. Mountain had 36,000 shares of outstanding common stock. The total book value and total fair value of Mountain's individual net assets on July 1, 2024, are both $760,000. The total fair value of the 36,000 shares of Mountain's common stock on December 31, 2024, is $810,000. Both companies have a January through December fiscal year. The following data pertains to Mountain Corporation during 2024: Dividends declared and paid, January 1-June 30 Dividends declared and paid, July 1-December 31 Net income, January 1-June 30 Net income, July 1-December 31 $ 12,600 $ 12,600 $ 14,600 $ 18,600 Required: 1. Prepare the necessary entries for 2024 under the equity method (other than for the purchase). 2. Prepare any necessary entries for 2024 (other than for the purchase) that would be required if the securities were accounted for under the fair value through net income method. Complete this question by entering your answers in the tabs below.

On July 1, 2024, Clearwater Incorporated purchased 7,200 shares of the outstanding common stock of Mountain Corporation at a cost of $152,000. Mountain had 36,000 shares of outstanding common stock. The total book value and total fair value of Mountain's individual net assets on July 1, 2024, are both $760,000. The total fair value of the 36,000 shares of Mountain's common stock on December 31, 2024, is $810,000. Both companies have a January through December fiscal year. The following data pertains to Mountain Corporation during 2024: Dividends declared and paid, January 1-June 30 Dividends declared and paid, July 1-December 31 Net income, January 1-June 30 Net income, July 1-December 31 $ 12,600 $ 12,600 $ 14,600 $ 18,600 Required: 1. Prepare the necessary entries for 2024 under the equity method (other than for the purchase). 2. Prepare any necessary entries for 2024 (other than for the purchase) that would be required if the securities were accounted for under the fair value through net income method. Complete this question by entering your answers in the tabs below.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

On August 1, 2020, Coronado Corporation purchased 20% of the outstanding voting shares in WLT Corporation for $1.290,000. At the time of purchase, WLT's net assets were undervalued by $72,200 and had a remaining useful life of 12 years. Both companies had a December 31 year-end. At the end of 2020, WLT reported a net income of $350,000. Also, on December 31, 2020, the fair value of the investment in WLT shares was $1,414,000. On January 10, 2021, WLT paid a cash dividend. Coronado's ownership entitles it to $23,400 of the dividend. Prepare the journal entries on the books of Coronado Corporation to record the transactions described above, assuming that the 20% interest in WLT does not represent significant influence, and that Coronado elected to account for its investment following the fair value through net income (FV-NI) model. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the…
On April 1, 2024, BigBen Company acquired 35% of the shares of LittleTick, Incorporated BigBen paid $140,000 for the investment, which is $52,000 more than 35% of the book value of LittleTick's identifiable net assets. BigBen attributed $12,400 of the $52,000 difference to inventory that will be sold in the remainder of 2024, and the rest to goodwill. LittleTick recognized a total of $17,000 of net income for 2024, and paid total dividends for the year of $10,800; these dividends were issued quarterly. BigBen's investment in LittleTick will affect BigBen's 2024 net income by: Note: Round your answer to nearest whole dollar amount. Multiple Choice earnings of $2,901. a loss of $7,938. earnings of $4,463. earnings of $1,562.
White purchased 10% of an investee's 100,000 outstanding ordinary shares on January 1, 2022 for P1,000,000. On October 31, 2022, White company purchased 20,000 additional shares of the investee for P3,000,000. On the same date, the fair value of the 10% interest was P1,400,000. The fair value of the net assets of the investee is equal to carrying amount except for an equipment whose fair value exceeds carrying amount by P640,000. The equipment has a remaining life of 5 years. The investee had not issued any additional shares for the year. The investee reported net income of P8,000.000 for the current year and paid P500,000 dividends. What amount should be reported on December 31 as investment in associate?
On January 1, 2022, Padme Corporation acquired another 18,000 common shares of Skywalker Company for $12 each. The book values of Skywalker’s net assets were equal to fair values except for specialized equipment, which was understated by $16,000. The equipment had an estimated remaining life of 8 years. During 2022, Skywalker reported net income of $85,000 and paid dividends of $12,000. At December 31, 2022, the fair value of Skywalker’s shares was $16 per share . REQUIRED: b) Prepare the journal entries on the books of Padme Corporation for the investment in Skywalker for the 2022 fiscal year.
On January 1, 2025, Riverbed Co. purchased 23,000 shares (a 10% interest) in Elton John Corp. for $1.510.000. At the time, the book value and the fair value of John's net assets were $12,900,000 On July 1, 2026. Riverbed paid $2.760.000 for 46,000 additional shares of John common stock, which represented a 20% investment in John. As a result of this transaction, Riverbed owns 30% of John and can exercise significant influence over John's operating and financial policies John reported the following net income and declared and paid the following dividends Dividend per Share None Year ended 12/31/25 Six months ended 6/30/26 Six months ended 12/31/26 Net Income $680,000 $20,000 Investment in Eton John Corp 888.000 None $1.50 Determine the ending balance that Riverbed Co should report as its investment in John Corps at the end of 2026
On June 30, 2021, Peter, Inc. purchased the following shares at a total cost of P10,700,000 designated as FVPL investment: Number of shares Total fair value Faye Corp. 100,000 1,400,000 Barto Corp. 200,000 3,700,000 Kesha Corp. 400,000 5,600,000 At the end of the year, the fair values of the shares are as follows: Faye Corp. P17 Barto Corp. 21 Kesha Co. 11 On June 30, 2022, Peter sold 75% of its holdings in Kesha at P13 per share. How much is the realized gain on sale on FVPL to be reported in net income during 2022?
iller Company acquired an 80 percent interest in Taylor Company on January 1, 2022. Miller paid $744,000 in cash to the owners of Taylor to acquire these shares. In addition, the remaining 20 percent of Taylor shares continued to trade at a total value of $186,000 both before and after Miller's acquisition. On January 1, 2022, Taylor reported a book value of $530,000 (Common Stock = $265,000; Additional Paid-In Capital = $79,500; Retained Earnings = $185,500). Several of Taylor's buildings that had a remaining life of 20 years were undervalued by a total of $70,600. During the next three years, Taylor reports income and declares dividends as follows: Year Net Income Dividends 2022 $ 61,900 $ 8,900 2023 80, 100 13,400 2024 89,300 17,900 Required: Determine the appropriate answers for each of the following questions: a. What amount of excess depreciation expense should be recognized in the consolidated financial statements for the initial years following this acquisition? b. If a…
White purchased 10% of an investee’s 100,000 outstanding ordinary shares on January 1, 2022 for P1,000,000. On October 31, 2022, White company purchased 20,000 additional shares of the investee for P3,000,000. On the same date, the fair value of the 10% interest was P1,400,000. The fair value of the net assets of the investee is equal to carrying amount except for an equipment whose fair value exceeds carrying amount by P640,000. The equipment has a remaining life of 5 years. The investee had not issued any additional shares for the year. The investee reported net income of P8,000,000 for the current year and paid P500,000 dividends. What amount should be reported on December 31 as investment in associate? Present solution in good accounting form
On July 1, 2021, Clearwater Inc. purchased 7,200 shares of the outstanding common stock of Mountain Corporation at a cost of $192,000. Mountain had 24,000 shares of outstanding common stock. The total book value and total fair value of Mountain's Individual net assets on July 1, 2021, are both $640,000. The total fair value of the 24,000 shares of Mountain's common stock on December 31, 2021, is $730,000. Both companies have a January through December fiscal year. The following data pertains to Mountain Corporation during 2021: Dividends declared and paid, January 1-June 30 Dividends declared and paid, July 1-December 31 $11,400 $11,400 $13,400 $17,400 Net income, January 1-June 30 Net income, July 1-December 311 Required: 1. Prepare the necessary entries for 2021 under the equity method (other than for the purchase). 2. Prepare any necessary entries for 2021 (other than for the purchase) that would be required if the securities were accounted for under the fair value through net…
During the year 2021,David Company purchased 1,000 shares of Goliath Company ordinary shares at P150 per share, plus transaction costs of P4,000. The shares acquired are for trading purposes. At December 31, 2021, Goliath ordinary shares are selling at P180/share. During the year 2022, David sold 400 shares at P195/share incurring P2,000 transaction costs on the sale. On December 31, 2022, the equity securities have fair value of P200/share.How much unrealized holding gain should David report in profit or loss for the year 2022?
Hansaben
Adams Corporation acquired 90 percent of the outstanding voting shares of Barstow, Inc., on December 31, 2019. Adams paid a total of $603,000 in cash for these shares. The 10 percent noncontrolling interest shares traded on a daily basis at fair value of $67,000 both before and after Adams's acquisition. On December 31, 2019, Barstow had the following account balances: Current assets Land Buildings (10-year remaining life) Equipment (5-year remaining life) Patents (10-year remaining life) Notes payable (due in years) Common stock Retained earnings, 12/31/19 Debits Current assets Land Buildings. Equipment Investment in Barstow, Inc. Cost of goods sold Depreciation expense December 31, 2021, adjusted trial balances for the two companies follow: Adams Corporation Interest expense Dividends declared Total debits Credits Notes payable Common stock Retained earnings, 1/1/21 Revenues Investment income Total credits Book Value $ 160,000 120,000 220,000 160,000 $ 0 (200,000) (180,000) (280,000)…