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 18P
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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Milani, Inc., acquired 10 percent of Seida Corporation on January 1, 2020, for $190,000 and appropriately accounted for the investment using the fair-value method. On January 1, 2021, Milani purchased an additional 30 percent of Seida for $600,000 which resulted in significant influence over Seida. On that date, the fair value of Seida’s common stock was $2,000,000 in total. Seida’s January 1, 2021, book value equaled $1,850,000, although land was undervalued by $120,000. Any additional excess fair value over Seida’s book value was attributable to a trademark with an eight-year remaining life. During 2021, Seida reported income of $300,000 and declared and paid dividends of $110,000.
Prepare the 2021 journal entries for Milani related to its investment in Seida
4. Record dividend declaration from Seida.
Milani, Inc., acquired 10 percent of Seida Corporation on January 1, 2020, for $190,000 and appropriately accounted for the investment using the fair-value method. On January 1, 2021, Milani purchased an additional 30 percent of Seida for $600,000 which resulted in significant influence over Seida. On that date, the fair value of Seida’s common stock was $2,000,000 in total. Seida’s January 1, 2021, book value equaled $1,850,000, although land was undervalued by $120,000. Any additional excess fair value over Seida’s book value was attributable to a trademark with an eight-year remaining life. During 2021, Seida reported income of $300,000 and declared and paid dividends of $110,000.
Prepare the 2021 journal entries for Milani related to its investment in Seida.
1. Record acquisition of Seida stock.
Milani, Inc., acquired 10 percent of Seida Corporation on January 1, 2020, for $190,000 and appropriately accounted for the investment using the fair-value method. On January 1, 2021, Milani purchased an additional 30 percent of Seida for $600,000 which resulted in significant influence over Seida. On that date, the fair value of Seida’s common stock was $2,000,000 in total. Seida’s January 1, 2021, book value equaled $1,850,000, although land was undervalued by $120,000. Any additional excess fair value over Seida’s book value was attributable to a trademark with an eight-year remaining life. During 2021, Seida reported income of $300,000 and declared and paid dividends of $110,000.
Prepare the 2021 journal entries for Milani related to its investment in Seida
5. Record collection of dividend from investee.
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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