Investment : The act of allocating money to buy a monetary asset, in order to generate wealth in the future is referred to as investment. Equity investments : The financial instruments which claim ownership in the issuing company and pay a dividend revenue to the investor company, are referred to as equity securities. The investments in equity securities are referred to as equity investments. Equity method : Equity method is the method used for accounting equity investments which claim a significant influence of above 20% but less than 50% in the outstanding stock of the investee company. Fair value : Fair value is the price at which, both seller and buyer agree to exchange the asset. So, fair value is the selling price to the seller and the purchase price for the buyer. Journal entry : Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically. Debit and credit rules: Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts. Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts. To Journalize : The entries related to the investments during 2018, for Company R assuming the investment is made under fair value option method.

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Answer 1

Question

Chapter 12, Problem 12.12P

1.

To determine

Investment: The act of allocating money to buy a monetary asset, in order to generate wealth in the future is referred to as investment.

Equity investments: The financial instruments which claim ownership in the issuing company and pay a dividend revenue to the investor company, are referred to as equity securities. The investments in equity securities are referred to as equity investments.

Equity method: Equity method is the method used for accounting equity investments which claim a significant influence of above 20% but less than 50% in the outstanding stock of the investee company.

Fair value: Fair value is the price at which, both seller and buyer agree to exchange the asset. So, fair value is the selling price to the seller and the purchase price for the buyer.

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Debit and credit rules:

Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.

Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

To Journalize: The entries related to the investments during 2018, for Company R assuming the investment is made under fair value option method.

2.

To determine

To Journalize: The entries related to the investments during 2018, for Company R assuming the investment is made under equity method.

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Answer 2

Question

Chapter 12, Problem 12.12P

1.

To determine

Investment: The act of allocating money to buy a monetary asset, in order to generate wealth in the future is referred to as investment.

Equity investments: The financial instruments which claim ownership in the issuing company and pay a dividend revenue to the investor company, are referred to as equity securities. The investments in equity securities are referred to as equity investments.

Equity method: Equity method is the method used for accounting equity investments which claim a significant influence of above 20% but less than 50% in the outstanding stock of the investee company.

Fair value: Fair value is the price at which, both seller and buyer agree to exchange the asset. So, fair value is the selling price to the seller and the purchase price for the buyer.

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Debit and credit rules:

Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.

Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

To Journalize: The entries related to the investments during 2018, for Company R assuming the investment is made under fair value option method.

2.

To determine

To Journalize: The entries related to the investments during 2018, for Company R assuming the investment is made under equity method.

Expert Solution & Answer

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Check out a sample textbook solution

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Answer 3

Question

Chapter 12, Problem 12.12P

1.

To determine

Investment: The act of allocating money to buy a monetary asset, in order to generate wealth in the future is referred to as investment.

Equity investments: The financial instruments which claim ownership in the issuing company and pay a dividend revenue to the investor company, are referred to as equity securities. The investments in equity securities are referred to as equity investments.

Equity method: Equity method is the method used for accounting equity investments which claim a significant influence of above 20% but less than 50% in the outstanding stock of the investee company.

Fair value: Fair value is the price at which, both seller and buyer agree to exchange the asset. So, fair value is the selling price to the seller and the purchase price for the buyer.

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Debit and credit rules:

Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.

Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

To Journalize: The entries related to the investments during 2018, for Company R assuming the investment is made under fair value option method.

2.

To determine

To Journalize: The entries related to the investments during 2018, for Company R assuming the investment is made under equity method.

Expert Solution & Answer

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Answer 4

Question

Chapter 12, Problem 12.12P

1.

To determine

Investment: The act of allocating money to buy a monetary asset, in order to generate wealth in the future is referred to as investment.

Equity investments: The financial instruments which claim ownership in the issuing company and pay a dividend revenue to the investor company, are referred to as equity securities. The investments in equity securities are referred to as equity investments.

Equity method: Equity method is the method used for accounting equity investments which claim a significant influence of above 20% but less than 50% in the outstanding stock of the investee company.

Fair value: Fair value is the price at which, both seller and buyer agree to exchange the asset. So, fair value is the selling price to the seller and the purchase price for the buyer.

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Debit and credit rules:

Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.

Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

To Journalize: The entries related to the investments during 2018, for Company R assuming the investment is made under fair value option method.

2.

To determine

To Journalize: The entries related to the investments during 2018, for Company R assuming the investment is made under equity method.

Expert Solution & Answer

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Answer 5

Chapter 12, Problem 12.12P

1.

To determine

Investment: The act of allocating money to buy a monetary asset, in order to generate wealth in the future is referred to as investment.

Equity investments: The financial instruments which claim ownership in the issuing company and pay a dividend revenue to the investor company, are referred to as equity securities. The investments in equity securities are referred to as equity investments.

Equity method: Equity method is the method used for accounting equity investments which claim a significant influence of above 20% but less than 50% in the outstanding stock of the investee company.

Fair value: Fair value is the price at which, both seller and buyer agree to exchange the asset. So, fair value is the selling price to the seller and the purchase price for the buyer.

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Debit and credit rules:

Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.

Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

To Journalize: The entries related to the investments during 2018, for Company R assuming the investment is made under fair value option method.

2.

To determine

To Journalize: The entries related to the investments during 2018, for Company R assuming the investment is made under equity method.

Answer 6

Chapter 12, Problem 12.12P

1.

To determine

Investment: The act of allocating money to buy a monetary asset, in order to generate wealth in the future is referred to as investment.

Equity investments: The financial instruments which claim ownership in the issuing company and pay a dividend revenue to the investor company, are referred to as equity securities. The investments in equity securities are referred to as equity investments.

Equity method: Equity method is the method used for accounting equity investments which claim a significant influence of above 20% but less than 50% in the outstanding stock of the investee company.

Fair value: Fair value is the price at which, both seller and buyer agree to exchange the asset. So, fair value is the selling price to the seller and the purchase price for the buyer.

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Debit and credit rules:

Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.

Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

To Journalize: The entries related to the investments during 2018, for Company R assuming the investment is made under fair value option method.

Answer 7

Chapter 12, Problem 12.12P

1.

To determine

Investment: The act of allocating money to buy a monetary asset, in order to generate wealth in the future is referred to as investment.

Equity investments: The financial instruments which claim ownership in the issuing company and pay a dividend revenue to the investor company, are referred to as equity securities. The investments in equity securities are referred to as equity investments.

Equity method: Equity method is the method used for accounting equity investments which claim a significant influence of above 20% but less than 50% in the outstanding stock of the investee company.

Fair value: Fair value is the price at which, both seller and buyer agree to exchange the asset. So, fair value is the selling price to the seller and the purchase price for the buyer.

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Debit and credit rules:

Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.

Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

To Journalize: The entries related to the investments during 2018, for Company R assuming the investment is made under fair value option method.

Answer 8

2.

To determine

To Journalize: The entries related to the investments during 2018, for Company R assuming the investment is made under equity method.

Answer 9

2.

To determine

To Journalize: The entries related to the investments during 2018, for Company R assuming the investment is made under equity method.

Answer 10

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Answer 11

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Answer 12

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Answer 13

Ch. 12 - All investments in debt securities are classified...Ch. 12 - When market rates of interest rise after a...Ch. 12 - Does GAAP distinguish between fair values that are...Ch. 12 - When a debt investment is acquired to be held for...Ch. 12 - Prob. 12.5Q Ch. 12 - What is comprehensive income? Its composition...Ch. 12 - Why are holding gains and losses treated...Ch. 12 - Prob. 12.8Q Ch. 12 - Prob. 12.9Q Ch. 12 - Prob. 12.10Q

Solution Summary: The author explains that investment is the act of allocating money to buy a monetary asset, in order to generate wealth in the future.

To Journalize: The entries related to the investments during 2018, for Company R assuming the investment is made under equity method.

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Chapter 12 Solutions