INTERMEDIATE ACCOUNTING (LL) W/CONNECT
9th Edition
ISBN: 9781260679694
Author: SPICELAND
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 12, Problem 12.14BE
Equity method investments
• LO12-6, LO12-9
Kim Company bought 30% of the shares of Phelps, Inc., at the start of 2018. Kim paid $10 million for the shares. Thirty percent of the book value of Phelps’s net assets is $8 million, and the difference of $2 million is due to land that Phelps owns that has appreciated in value. During 2018, Phelps reported net income of $1 million and paid a cash dividend of $0.5 million. At what amount does Kim carry the Phelps investment on its
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
Question 10
Choose the correct answer from the choices.
↑
3 minutes ago
☆
Live Large Inc. had the following transactions involving non-strategic investments during 2023.
2023
Apr. 1 Paid $100,ese to buy a 90-day term deposit, $100,000 principal amount, 5.0%, dated April 1. There was a $50 transaction
fee included in the above-noted payment amount.
12 Purchased 3,000 common shares of Blue Balloon Ltd. at $22.25. There was a $50 transaction fee included in the above-noted
payment amount.
June 9 Purchased 1,800 common shares of Purple Car Corp. at $49.50. There was a $50 transaction fee included in the above-noted
payment amount.
20 Purchased 700 common shares of Yellow Tech Ltd. at $15.75. There was a $50 transaction fee included in the above-noted
payment amount.
July 1 Purchased for $67,412 a 7.0%, $65,000 Space Explore Inc. bond that matures in eight years when the market interest rate
was 6.4%. There was a $50 transaction fee included in the above-noted payment amount. Interest is paid semiannually
beginning December 31, 2023. Live Large…
Problem 7: In January 2020, Golden Company
invested in P900,000 equity securities representing
15% interest in Rings Company. Golden Company
incurred transaction cost of P100,000. On
December 31, 2020, this investment has a market
value of P950,000. On July 1, 2021, Golden
Company sold all the investments for P1,200,000.
7.1 What amount of gain on sale should
Golden Company recognize in profit or loss
assuming the security was classified as
Investment at FVPL?
7.2 How much is the amount transferred to
Retained earnings upon sale assuming the
security was classified as Investment at
FVOCI?
7.3 Prepare all the necessary journal entries.
Chapter 12 Solutions
INTERMEDIATE ACCOUNTING (LL) W/CONNECT
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. 12.5QCh. 12 - What is comprehensive income? Its composition...Ch. 12 - Why are holding gains and losses treated...Ch. 12 - Prob. 12.8QCh. 12 - Prob. 12.9QCh. 12 - Prob. 12.10Q
Ch. 12 - Under IFRS No. 9, which reporting categories are...Ch. 12 - Prob. 12.12QCh. 12 - Do U.S. GAAP and IFRS differ in the amount of...Ch. 12 - Under what circumstances is the equity method used...Ch. 12 - The equity method has been referred to as a...Ch. 12 - In the application of the equity method, how...Ch. 12 - Prob. 12.17QCh. 12 - Prob. 12.18QCh. 12 - Prob. 12.19QCh. 12 - How does IFRS differ from U.S. GAAP with respect...Ch. 12 - What is the effect of a company electing the fair...Ch. 12 - Define a financial instrument. Provide three...Ch. 12 - Some financial instruments are called derivatives....Ch. 12 - (Based on Appendix 12A) Northwest Carburetor...Ch. 12 - Prob. 12.25QCh. 12 - Prob. 12.26QCh. 12 - (Based on Appendix 12B) Reporting an investment at...Ch. 12 - Prob. 12.28QCh. 12 - Explain how the CECL model (introduced in ASU No....Ch. 12 - Prob. 12.30QCh. 12 - Prob. 12.1BECh. 12 - Prob. 12.2BECh. 12 - Trading securities LO12-3 For the Coca-Cola bonds...Ch. 12 - Available -for-sale securities LO12-4 SL...Ch. 12 - Available -for-sale securities LO12-4 For the...Ch. 12 - Prob. 12.6BECh. 12 - Prob. 12.7BECh. 12 - Prob. 12.8BECh. 12 - Prob. 12.9BECh. 12 - Prob. 12.10BECh. 12 - Equity investments and dividends LO12-5 Turner...Ch. 12 - Prob. 12.12BECh. 12 - Prob. 12.13BECh. 12 - Equity method investments LO12-6, LO12-9 Kim...Ch. 12 - Change in principle; change to the equity method ...Ch. 12 - Fair value option; equity method investments ...Ch. 12 - Prob. 12.17BECh. 12 - Impairments (AFS Credit Loss Model) (Appendix 12B)...Ch. 12 - Prob. 12.19BECh. 12 - Prob. 12.20BECh. 12 - Prob. 12.1ECh. 12 - Prob. 12.2ECh. 12 - Securities held-to-maturity LO12-1 FFT...Ch. 12 - Prob. 12.4ECh. 12 - Prob. 12.5ECh. 12 - Trading securities LO12-1 [This is a variation of...Ch. 12 - Various transactions relating to trading...Ch. 12 - Prob. 12.8ECh. 12 - Securities available-for-sale; adjusting entries ...Ch. 12 - Available -for-sale securities LO12-1, LO12-4...Ch. 12 - Available -for-sale securities LO12-1, LO12-4...Ch. 12 - Available -for-sale securities LO12-1, LO12-4...Ch. 12 - Classification of securities; adjusting entries ...Ch. 12 - Prob. 12.14ECh. 12 - Equity investments; fair value through net income ...Ch. 12 - Equity investments; fair value through net income ...Ch. 12 - Prob. 12.17ECh. 12 - Equity investments; fair value through net income ...Ch. 12 - Investment securities and equity method...Ch. 12 - Equity method; purchase; investee income;...Ch. 12 - Error corrections; equity method investment ...Ch. 12 - Prob. 12.22ECh. 12 - Prob. 12.23ECh. 12 - Prob. 12.24ECh. 12 - Prob. 12.25ECh. 12 - Prob. 12.26ECh. 12 - Prob. 12.27ECh. 12 - Prob. 12.28ECh. 12 - Prob. 12.29ECh. 12 - Prob. 12.30ECh. 12 - Prob. 12.31ECh. 12 - Prob. 12.32ECh. 12 - Accounting for impairments under IFRS (Appendix...Ch. 12 - Prob. 12.1PCh. 12 - Prob. 12.2PCh. 12 - Securities available-for-sale; bond investment;...Ch. 12 - Prob. 12.4PCh. 12 - Various transactions related to trading securities...Ch. 12 - Various transactions related to securities...Ch. 12 - Prob. 12.7PCh. 12 - Various transactions relating to trading...Ch. 12 - Securities held-to-maturity; securities available...Ch. 12 - Investment securities and equity method...Ch. 12 - Prob. 12.11PCh. 12 - Prob. 12.12PCh. 12 - Prob. 12.13PCh. 12 - Equity method LO12-6, LO12-7 On January 2, 2018,...Ch. 12 - Prob. 12.15PCh. 12 - Prob. 12.16PCh. 12 - Accounting for debt and equity investments ...Ch. 12 - Prob. 12.18PCh. 12 - Real World Case 121 Intels investments LO12-4 The...Ch. 12 - Prob. 12.2BYPCh. 12 - Prob. 12.4BYPCh. 12 - Prob. 12.6BYPCh. 12 - Real World Case 127 Comprehensive income Microsoft...Ch. 12 - Continuing Cases Target Case LO12-4, LO12-6...
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
- Please help me to solve this problemarrow_forwardPls. answer this onearrow_forwardOn January 1, 2023 AAA Company acquired BBB Company 10%, P600,000 bonds for P621,300. The bonds which pays interest on every June 30 and December 31. The bond will mature on January 1, 2028 and were purchased to yield 9%. The business model of the AAA Company in managing investment is to hold the asset in order to collect the contractual cash flows. 1. how much is the interest income in 2023 2.how much is the carrying amount of the bonds at december 31,2023 3.how much is the unamortized portion of premium on december 31, 2024 4. how much cash to be debited on december 31,2024arrow_forward
- The investments of Harlon Enterprises included the following cost and fair value amounts ($ in millions): Fair Value, Dec. 31 2022 N/A $ 37 Equity Investments A Corporation shares B Corporation shares C Corporation shares. D Industries shares Totals Cost $ 20 35 15 45 $115 1 Increase 2 Amount Harlon accounts for its equity investment portfolio at fair value through net income. Harlon sold its holdings of A Corporation shares on June 1, 2022, for $15 million. On September 12, it purchased the C Corporation shares. $ 2021 $ 14 Required: 1. What is the effect of the sale of the A Corporation shares and the purchase of the C Corporation shares on Harlon's 2022 pretax $ 35 N/A 46 $95 earnings? 2. At what amount should Harlon's securities equity investment portfolio be reported in its 2022 balance sheet? (For all requirements, enter your answers in millions, (i.e., 10,000,000 should be entered as 10).) 14 50 $101 6 million 5 milionarrow_forwardDont uplode any image in answer Tanner-UNF Corporation acquired as a long-term investment $250 million of 4.0% bonds, dated July 1, on July 1, 2024. Company management has the positive intent and ability to hold the bonds until maturity. The market interest rate (yield) was 7% for bonds of similar risk and maturity. Tanner-UNF paid $220.0 million for the bonds. The company will receive interest semiannually on June 30 and December 31. As a result of changing market conditions, the fair value of the bonds at December 31, 2024, was $220.0 million. Required: 1. & 2. Prepare the journal entry to record Tanner-UNF’s investment in the bonds on July 1, 2024 and interest on December 31, 2024, at the effective (market) rate. 3. At what amount will Tanner-UNF report its investment in the December 31, 2024, balance sheet? 4. Suppose Moody’s bond rating agency downgraded the risk rating of the bonds motivating Tanner-UNF to sell the investment on January 2, 2025, for $200.0 million. Prepare…arrow_forwardNonearrow_forward
- Do not give solution in imagearrow_forwardWORK Check my work Tanner-UNF Corporation acquired as an investment $235 million of 8% bonds, dated July 1, on July 1, 2024. Company management is holding the bonds in its treding portfolio. The market interest rate (yield) was 10% for bonds of similar risk and maturity. Tanner-UNF paid $200 million for the bonds. The company will receive interest semiannually on June 30 and December 31. As a result of changing market conditions, the fair value of the bonds at December 31, 2024, was $215 million. Required: 1. & 2. Prepare the journal entry to record Tanner-UNF's Investment in the bonds on July 1, 2024 and interest on December 31, 2024, at the effective (merket) rate. 3. Prepare any additional journal entry necessary for Tanner-UNF to report its investment in the December 31, 2024, balance sheet 4. Suppose Moody's bond rating agency downgraded the risk rating of the bonds motivating Tanner-UNF to sell the investment on January 2, 2025, for $180 milion. Prepare the journal entries…arrow_forwardWhat amount of income from the investment should be Problem 17-11 (AICPA Adapted) On July 1, 2021, Focus Company purchased 30,000 shares of Eagle Company's 100,000 outstanding ordinary shares for P200 per share. On December 15, 2021, Eagle Company paid P1,000,000 dividends. Eagle Company's net income for 2021 wee P5,000,000 earned evenly throughout the year. reported for the current year? a. 500,000 b. 300,000 c. 750,000 d. 150,000 518arrow_forward
- 43 Sycamore, Inc. purchased P100,000 of 8 percent bonds of Alvarado Industries on January 1, 2022, at a discount, paying P92,278. The bonds mature January 1, 2027, and yield 10 percent; interest is payable each July 1 and January 1. Sycamore has a business model whose objective is to hold assets in order to collect contractual cash flows and the contractual terms of the financial asset provides specified dates with regard to cash flows that are solely payments of principal and interest. On December 31, 2022, when the market rate of interest is 12%, and the fair value of the bonds is P89,934, Sycamore will record interest revenue in 2022 of?arrow_forwardVishnuarrow_forwardPROBLEM 28 (AICPA Adapted)Miraflores owned 10,000 shares in Maquiling Company acquired several years ago at P100 per share to be held as a long-term investment. Beginning in 2015, Miraflores received a dividend of P40 pershare. Maquiling Company notifies the investor that a portion of this amount represented earnings and the balance as liquidating dividends. The allocation to be made as follows: Earned Dividend Liquidating Dividend2015 - P402016 P10 P302017 P15 P252018 P20 P202019 P25 P15 Requirements:1. Prepare journal entries on the books of…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning
Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning
Financial instruments products; Author: fi-compass;https://www.youtube.com/watch?v=gvxozM3TUIg;License: Standard Youtube License