Advanced Financial Accounting
12th Edition
ISBN: 9781259916977
Author: Christensen, Theodore E., COTTRELL, David M., Budd, Cassy
Publisher: Mcgraw-hill Education,
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 1, Problem 1.16Q
To determine
Introduction: The valuation of shares refers to the process by which an organization records the value of additional shares which were additionally purchased by that organization.
To define: The treatment of previously owned shares under stock valuation.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
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.…
SCENARIO: AMO Limited purchases shares of BEMI Limited by investing 1,000,000.00 ZMW. The dividend received on these shares reflects in the profit and loss account of the company. Further, the workers of the company receive an annual bonus and the dividend amount is taken into account in calculating the overall bonus figure.A few years later, AMO Limited transfers the shares of BEMI Limited to CUMI Limited, which is a wholly owned subsidiary of AMOLimited. Post transferring of the shares, the dividends do not reflect in the accounts of AMO Limited. This leads to a reduction in the overall bonus amount figure. Is AMO Limited legally allowed to do so? Which legal theory needs to be mentioned here?
Blanton Corporation purchased 15% of the outstanding shares of common stock of Worton Corporation as a long-term investment. Subsequently, Worton Corporation reported net income and declared and paid cash dividends. What journal entry would Blanton Corporation use to record the dividends it receives?
Chapter 1 Solutions
Advanced Financial Accounting
Ch. 1 - What types of circumstances would encourage...Ch. 1 - How would the decision to dispose of a segment of...Ch. 1 - Prob. 1.3QCh. 1 - Prob. 1.4QCh. 1 - Prob. 1.5QCh. 1 - Prob. 1.6QCh. 1 - Prob. 1.7QCh. 1 - Prob. 1.8QCh. 1 - Prob. 1.9QCh. 1 - Prob. 1.10Q
Ch. 1 - Prob. 1.11QCh. 1 - Prob. 1.12QCh. 1 - Prob. 1.13QCh. 1 - Prob. 1.14QCh. 1 - Within the measurement period following a business...Ch. 1 - Prob. 1.16QCh. 1 - Prob. 1.1CCh. 1 - Prob. 1.2CCh. 1 - Prob. 1.3CCh. 1 - Prob. 1.4CCh. 1 - Risks Associated with Acquisitions Not all...Ch. 1 - Prob. 1.6CCh. 1 - Prob. 1.1.1ECh. 1 - Prob. 1.1.2ECh. 1 - Prob. 1.1.3ECh. 1 - Multiple-Choice Questions on Complex Organizations...Ch. 1 - Prob. 1.1.5ECh. 1 - Prob. 1.2.1ECh. 1 - Prob. 1.2.2ECh. 1 - Multiple-Choice Questions on Recording Business...Ch. 1 - Prob. 1.2.4ECh. 1 - Multiple-Choice Questions on Recording Business...Ch. 1 - Multiple-Choice Questions on Reported Balances...Ch. 1 - Multiple-Choice Questions on Reported Balances...Ch. 1 - Prob. 1.3.3ECh. 1 - Prob. 1.3.4ECh. 1 - Prob. 1.4.1ECh. 1 - Prob. 1.4.2ECh. 1 - Prob. 1.4.3ECh. 1 - Multiple-Choice Questions Involving Account...Ch. 1 - Prob. 1.4.5ECh. 1 - Prob. 1.5ECh. 1 - Prob. 1.6ECh. 1 - Prob. 1.7ECh. 1 - Prob. 1.8ECh. 1 - Prob. 1.9ECh. 1 - Prob. 1.10ECh. 1 - Balances Reported Following Combination Palm...Ch. 1 - Goodwill Recognition Spur Corporation reported the...Ch. 1 - Acquisition Using Debentures Planter Corporation...Ch. 1 - Bargain Purchase Using the data resented in E1-13,...Ch. 1 - Prob. 1.15ECh. 1 - Prob. 1.16ECh. 1 - Prob. 1.17ECh. 1 - Prob. 1.18ECh. 1 - Prob. 1.19ECh. 1 - Prob. 1.20ECh. 1 - Prob. 1.21ECh. 1 - Prob. 1.22ECh. 1 - Prob. 1.23ECh. 1 - Prob. 1.24PCh. 1 - Prob. 1.25PCh. 1 - Prob. 1.26PCh. 1 - Acquisition in Multiple Steps Peal Corporation...Ch. 1 - Prob. 1.28PCh. 1 - Prob. 1.29PCh. 1 - Prob. 1.30PCh. 1 - Prob. 1.31PCh. 1 - Computation of Account Balances Saspro Division is...Ch. 1 - Prob. 1.33PCh. 1 - Prob. 1.34PCh. 1 - Prob. 1.35PCh. 1 - Business Combination Following are the balance...Ch. 1 - Prob. 1.37PCh. 1 - Prob. 1.38PCh. 1 - Prob. 1.39PCh. 1 - Prob. 1.40P
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- On 8 August 20x3, alpha Ltd acquired 20000 shares in Beta Ltd (Beta) that gave alpha control over Beta in return for 10000 of its own shares. at that date, Alpha's Shares had a market value of $2.70 each, while Beta's Share had a market value of $1.30 each. Fees paid to legal advisers for the transaction totalled $2000. What is the fair value of the consideration transferred?arrow_forwardOn 8 August 20X3, Alpha Ltd (Alpha) acquired 20 000 shares in Beta Ltd (Beta) that gave Alpha control over Beta in return for 10 000 of its own shares. At that date, Alpha’s shares had a market value of $2.70 each, while Beta’s shares had a market value of $1.30 each. Fees paid to legal advisers for the transaction totalled $2000. What is the fair value of the consideration transferred? a. $29 000 b. $26 000 c. $28 000 d. $27 000arrow_forwardAira Company issued rights to subscribe to its stock, the ownership of 4 shares entitling the shareholders to subscribe for 1 share at P100. An investor owned 50,000 shares with total cost of P5,000,000. The share is quoted right-on at 125. The stock rights are accounted for separately and measured initially at fair value. What is the cost of the new investment assuming all of the stock rights are exercised by the investor?arrow_forward
- Please do it asap.arrow_forwardAlex Ltd. Is taken over by Billy Ltd. On the following terms: The assets and liabilities of Alex Ltd, shall be valued at P3,000,000 and P1,000,000. P5,000 shall be paid in cash and the balance of consideration shall be discharged by issue of shares of P10 each at a premium of 50%. Show the Calculation of purchase consideration and state the number of shares issued to the shareholders of Alex Ltd.arrow_forwardOn January 6, 20Y8, Bulldog Co. purchased 28% of the outstanding common stock of Gator Co. for $245,700. Gator Co. paid total dividends of $28,900 to all NKSHEET.AL... shareholders on June 30, 20Y8. Gator had a net loss of $56,500 for 20Y8. SO Required: GO a. Journalize Bulldog's purchase of the stock, receipt of the dividends, and the adjusting entry for the equity loss in Gator Co. stock. Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for journal explanations. Every line on a journal GO page is used for debit or credit entries. CNOW journals will automatically indent a credit entry when a credit amount is entered. b. Compute the balance of Investment in Gator Co. Stock on December 31, 20Y8. LANKSHEET.AL... c. How does valuing an investment under the equity method differ from valuing an investment at fair value? Chart of Accounts CHART OF ACCOUNTS Bulldog Co. General Ledger REVENUE ASSETS 410 Sales 110 Cash 611 444 Dntti Cacharrow_forward
- Andrew Company purchased 800 ordinary shares of Valley Industries as a trading investment for P148,800. During the year, Valley Industries paid a cash dividend of P32 per share. At year-end, Valley’s shares were selling for P174 per share. In the income statement for the current year-end, what net amount of unrealized gain/loss and dividend revenue should be reported by Andrew Company?arrow_forwardOn January 2, 2020. Tuao Company purchased 10% of Abulug Company's outstanding ordinary shares for P20.000.000. Tuao is the largest single shareholder in Abulug and this gives Tuao the power to participate in the financial and operating policy decisions of the Abulug but is not control or joint control over those policies. Abulug reported profit of P10,000,000 and paid dividend of P4,000,000. What should be the balance in Tuao's investment in Abulug Company at the end of 2020? A. 21,000,000 B. 20,000,000 C. 21,400,000 D. 20,600,000arrow_forwardOn January 2, 2020, Tuao Company purchased 10% of Abulug Company's outstanding ordinary shares for P20,000,000. Tuac is the largest single shareholder in Abulug and this gives Tuao the power to participate in the financial and operating policy decisions of the Abulug but is not control or joint control over those policies. Abulug reported profit of P10,000,000 and paid dividend of P4,000,000. What should be the balance in Tuao's investment in Abulug Company at the end of 2020? P21,000,000 P21,400,000 P20,600,000 P20,000,000arrow_forward
- On January 2, 2020, Tuao Company purchased 10% of Abulug Company’s outstanding ordinary shares for P20,000,000. Tuao is the largest single shareholder in Abulug and this gives Tuao the power to participate in the financial and operating policy decisions of the Abulug but is not control or joint control over those policies. Abulug reported profit of P10,000,000 and paid dividend of P4,000,000. What should be the balance in Tuao’s investment in Abulug Company at the end of 2020?arrow_forwardOn 30 April 20X2, Marc Company purchased 4,000 shares of Spencer Ltd. for $17 per share plus $400 in commission. In 20X2, the company received a $0.65 per share dividend, and the shares had a fair value of $16 per share at the end of the year. In 20X3, the dividend was $1.05 per share, and the fair value was $20 per share at the end of the year. In 20X4, the shares were sold for $18 per share less a $550 commission. Required:1. Show the amounts and accounts that would be reported in earnings and the statement of financial position for 20X2, 20X3, and 20X4 if the company uses the: (Negative amounts should be indicated by minus sign.)a. Cost method. b. FVTPL method. c. FVOCI-Equity method; realized amounts are transferred to retained earnings.arrow_forward2. On January 1, year 1, ABC Company purchased 80% of the stock of XYZ for P4,000,000 cash. Prior to the acquisition, XYZ had 100,000 shares of stock outstanding. On the date of acquisition, XYZ's stock had fair value of P52 per share. During the year, XYZ reported P280,000 in net income and paid dividends of P50,000. What is the balance in the noncontrolling interest account on ABC's balance sheet on December 31, year 1?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education