Advanced Accounting
14th Edition
ISBN: 9781260247824
Author: Joe Ben Hoyle, Thomas F. Schaefer, Timothy S. Doupnik
Publisher: RENT MCG
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Chapter 1, Problem 17P
To determine
Introduction: The equity method of accounting is a method where the investment is recognized at cost initially and thereafter accounted for based on the change in the investor’s share in investee net assets. The share in the investee’s profit or loss is included in the investor's profit or loss. Fair value method initial investment is recorded at cost and then adjusted with fair value.
The
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On January 1, 2021, Alamar Corporation acquired a 42 percent interest in Burks, Inc., for $185,000. On that date, Burks’s balance sheet disclosed net assets with both a fair and book value of $337,000. During 2021, Burks reported net income of $84,000 and declared and paid cash dividends of $24,000. Alamar sold inventory costing $29,000 to Burks during 2021 for $41,000. Burks used all of this merchandise in its operations during 2021.
Prepare all of Alamar’s 2021 journal entries to apply the equity method to this investment. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
On January 1, 2021, Alamar Corporation acquired a 36 percent interest in Burks, Inc., for $198,000. On that date, Burks’s balance sheet disclosed net assets with both a fair and book value of $353,000. During 2021, Burks reported net income of $84,000 and declared and paid cash dividends of $24,000. Alamar sold inventory costing $27,000 to Burks during 2021 for $35,000. Burks used all of this merchandise in its operations during 2021.
Prepare all of Alamar’s 2021 journal entries to apply the equity method to this investment.
4. Record the collection of dividend from investee.
On January 1, 2021, Alamar Corporation acquired a 36 percent interest in Burks, Inc., for $198,000. On that date, Burks’s balance sheet disclosed net assets with both a fair and book value of $353,000. During 2021, Burks reported net income of $84,000 and declared and paid cash dividends of $24,000. Alamar sold inventory costing $27,000 to Burks during 2021 for $35,000. Burks used all of this merchandise in its operations during 2021.
Prepare all of Alamar’s 2021 journal entries to apply the equity method to this investment.
3. Record the investee dividend declaration.
Chapter 1 Solutions
Advanced Accounting
Ch. 1 - What advantages does a company achieve when it...Ch. 1 - A company acquires a rather large investment in...Ch. 1 - What accounting treatments are appropriate for...Ch. 1 - Prob. 4QCh. 1 - Why does the equity method record dividends from...Ch. 1 - Prob. 6QCh. 1 - Smith. Inc., has maintained an ownership interest...Ch. 1 - Prob. 8QCh. 1 - Because of the acquisition of additional investee...Ch. 1 - Prob. 10Q
Ch. 1 - Prob. 11QCh. 1 - Prob. 12QCh. 1 - In a stock acquisition accounted for by the equity...Ch. 1 - Prob. 14QCh. 1 - What is the difference between downstream and...Ch. 1 - Prob. 16QCh. 1 - Prob. 17QCh. 1 - What is the fair-value option for reporting equity...Ch. 1 - When an investor uses the equity method to account...Ch. 1 - Prob. 2PCh. 1 - Prob. 3PCh. 1 - Under fair-value accounting for an equity...Ch. 1 - When an equity method investment account is...Ch. 1 - Prob. 6PCh. 1 - Prob. 7PCh. 1 - Prob. 8PCh. 1 - Evan Company reports net income of $140,000 each...Ch. 1 - Prob. 10PCh. 1 - Prob. 11PCh. 1 - Prob. 12PCh. 1 - Prob. 13PCh. 1 - Prob. 14PCh. 1 - Prob. 15PCh. 1 - Prob. 16PCh. 1 - Prob. 17PCh. 1 - Prob. 18PCh. 1 - Prob. 19PCh. 1 - Prob. 20PCh. 1 - Prob. 21PCh. 1 - Prob. 23PCh. 1 - Matthew, Inc., owns 30 percent of the outstanding...Ch. 1 - Prob. 26PCh. 1 - Prob. 28PCh. 1 - Prob. 29PCh. 1 - Prob. 30PCh. 1 - Prob. 31P
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