(1) Equity investment : Equity investments are stock instruments which claim ownership in the investee company and pay a dividend revenue to the investor company. Fair value through net income method : This is the accounting method used for accounting stock or equity investments which claim less than 20% of the outstanding stock of the investee company. 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 adjusting entry as at December 31, 2018, if the fair value adjustment was $145,000, fair value of shares was $1,175,000, and the cost of shares was $1,345,000

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Answer 1

Question

Chapter 12, Problem 12.17E

To determine

(1)

Equity investment: Equity investments are stock instruments which claim ownership in the investee company and pay a dividend revenue to the investor company.

Fair value through net income method: This is the accounting method used for accounting stock or equity investments which claim less than 20% of the outstanding stock of the investee company.

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 adjusting entry as at December 31, 2018, if the fair value adjustment was $145,000, fair value of shares was $1,175,000, and the cost of shares was $1,345,000

To determine

(2)

To journalize: The adjusting entry as at December 31, 2018, if the fair value adjustment was $145,000, fair value of shares was $1,275,000, and the cost of shares was $1,345,000

To determine

(3)

To journalize: The adjusting entry as at December 31, 2018, if the fair value adjustment was $145,000, fair value of shares was $1,375,000, and the cost of shares was $1,345,000

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KIARA LIMITED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER: ASSETS Property, plant and equipment (cost) Accumulated depreciation Long-term investments Inventory Accounts receivable Company tax paid in advance Bank EQUITY AND LIABILITIES 2024 2023 R R 2 490 000 1 620 000 (630 000) 660 000 1 050 000 1 230 000 30 000 (480 000) 450 000 1 290 000 900 000 0 750 000 660 000 5 580 000 4 440 000 Ordinary share capital 2 700 000 2 000 000 Retained income 1 500 000 1 158 000 Long-term loan from Kip Bank (15%) 900 000 1 000 000 Accounts payable 480 000 228 000 Company tax payable 0 54 000 5 580 000 4 440 000 ADDITIONAL INFORMATION All purchases and sales are on credit. Interim dividends paid during the year amounted to R150 750. Credit terms of 3/10 net 60 days are granted by creditors.

Accounting Question

REQUIRED Study the information given below and answer the following questions. Where discount factors are required use only the four decimals present value tables that appear after the formula sheet or in the module guide. Ignore taxes. 5.1 Calculate the Accounting Rate of Return on average investment of the second alternative (expressed to two decimal places). 5.2 Determine which of the two investment opportunities the company should choose by calculating the Net Present Value of each alternative. Your answer must include the calculation of the present values and NPV. 5.3 Calculate the Internal Rate of Return of the first alterative (expressed to two decimal places). Your answer must include two net present value calculations (using consecutive rates/percentages) and interpolation. INFORMATION The management of Bentall Incorporated is considering two investment opportunities: (5 marks) (9 marks) (6 marks) The first alternative involves the purchase of a new machine for R900 000 which…

Answer 2

Question

Chapter 12, Problem 12.17E

To determine

(1)

Equity investment: Equity investments are stock instruments which claim ownership in the investee company and pay a dividend revenue to the investor company.

Fair value through net income method: This is the accounting method used for accounting stock or equity investments which claim less than 20% of the outstanding stock of the investee company.

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 adjusting entry as at December 31, 2018, if the fair value adjustment was $145,000, fair value of shares was $1,175,000, and the cost of shares was $1,345,000

To determine

(2)

To journalize: The adjusting entry as at December 31, 2018, if the fair value adjustment was $145,000, fair value of shares was $1,275,000, and the cost of shares was $1,345,000

To determine

(3)

To journalize: The adjusting entry as at December 31, 2018, if the fair value adjustment was $145,000, fair value of shares was $1,375,000, and the cost of shares was $1,345,000

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Answer 3

Question

Chapter 12, Problem 12.17E

To determine

(1)

Equity investment: Equity investments are stock instruments which claim ownership in the investee company and pay a dividend revenue to the investor company.

Fair value through net income method: This is the accounting method used for accounting stock or equity investments which claim less than 20% of the outstanding stock of the investee company.

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 adjusting entry as at December 31, 2018, if the fair value adjustment was $145,000, fair value of shares was $1,175,000, and the cost of shares was $1,345,000

To determine

(2)

To journalize: The adjusting entry as at December 31, 2018, if the fair value adjustment was $145,000, fair value of shares was $1,275,000, and the cost of shares was $1,345,000

To determine

(3)

To journalize: The adjusting entry as at December 31, 2018, if the fair value adjustment was $145,000, fair value of shares was $1,375,000, and the cost of shares was $1,345,000

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Answer 4

Question

Chapter 12, Problem 12.17E

To determine

(1)

Equity investment: Equity investments are stock instruments which claim ownership in the investee company and pay a dividend revenue to the investor company.

Fair value through net income method: This is the accounting method used for accounting stock or equity investments which claim less than 20% of the outstanding stock of the investee company.

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 adjusting entry as at December 31, 2018, if the fair value adjustment was $145,000, fair value of shares was $1,175,000, and the cost of shares was $1,345,000

To determine

(2)

To journalize: The adjusting entry as at December 31, 2018, if the fair value adjustment was $145,000, fair value of shares was $1,275,000, and the cost of shares was $1,345,000

To determine

(3)

To journalize: The adjusting entry as at December 31, 2018, if the fair value adjustment was $145,000, fair value of shares was $1,375,000, and the cost of shares was $1,345,000

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Answer 5

Chapter 12, Problem 12.17E

To determine

(1)

Equity investment: Equity investments are stock instruments which claim ownership in the investee company and pay a dividend revenue to the investor company.

Fair value through net income method: This is the accounting method used for accounting stock or equity investments which claim less than 20% of the outstanding stock of the investee company.

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 adjusting entry as at December 31, 2018, if the fair value adjustment was $145,000, fair value of shares was $1,175,000, and the cost of shares was $1,345,000

To determine

(2)

To journalize: The adjusting entry as at December 31, 2018, if the fair value adjustment was $145,000, fair value of shares was $1,275,000, and the cost of shares was $1,345,000

To determine

(3)

To journalize: The adjusting entry as at December 31, 2018, if the fair value adjustment was $145,000, fair value of shares was $1,375,000, and the cost of shares was $1,345,000

Answer 6

Chapter 12, Problem 12.17E

To determine

(1)

Equity investment: Equity investments are stock instruments which claim ownership in the investee company and pay a dividend revenue to the investor company.

Fair value through net income method: This is the accounting method used for accounting stock or equity investments which claim less than 20% of the outstanding stock of the investee company.

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 adjusting entry as at December 31, 2018, if the fair value adjustment was $145,000, fair value of shares was $1,175,000, and the cost of shares was $1,345,000

Answer 7

Chapter 12, Problem 12.17E

To determine

(1)

Equity investment: Equity investments are stock instruments which claim ownership in the investee company and pay a dividend revenue to the investor company.

Fair value through net income method: This is the accounting method used for accounting stock or equity investments which claim less than 20% of the outstanding stock of the investee company.

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 adjusting entry as at December 31, 2018, if the fair value adjustment was $145,000, fair value of shares was $1,175,000, and the cost of shares was $1,345,000

Answer 8

To determine

(2)

To journalize: The adjusting entry as at December 31, 2018, if the fair value adjustment was $145,000, fair value of shares was $1,275,000, and the cost of shares was $1,345,000

Answer 9

To determine

(2)

To journalize: The adjusting entry as at December 31, 2018, if the fair value adjustment was $145,000, fair value of shares was $1,275,000, and the cost of shares was $1,345,000

Answer 10

To determine

(3)

To journalize: The adjusting entry as at December 31, 2018, if the fair value adjustment was $145,000, fair value of shares was $1,375,000, and the cost of shares was $1,345,000

Answer 11

To determine

(3)

To journalize: The adjusting entry as at December 31, 2018, if the fair value adjustment was $145,000, fair value of shares was $1,375,000, and the cost of shares was $1,345,000

Answer 12

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Answer 13

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Answer 14

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Answer 15

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 equity investments claim ownership in the investee company and pay dividend revenue to the investor company. Journal entry is a set of economic events which can be measured in monetary terms.

(2)

To journalize: The adjusting entry as at December 31, 2018, if the fair value adjustment was $145,000, fair value of shares was $1,275,000, and the cost of shares was $1,345,000

(3)

To journalize: The adjusting entry as at December 31, 2018, if the fair value adjustment was $145,000, fair value of shares was $1,375,000, and the cost of shares was $1,345,000

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Chapter 12 Solutions

Solution Summary: The author explains that equity investments claim ownership in the investee company and pay dividend revenue to the investor company. Journal entry is a set of economic events which can be measured in monetary terms.

(2) To journalize: The adjusting entry as at December 31, 2018, if the fair value adjustment was $145,000, fair value of shares was $1,275,000, and the cost of shares was $1,345,000

(3) To journalize: The adjusting entry as at December 31, 2018, if the fair value adjustment was $145,000, fair value of shares was $1,375,000, and the cost of shares was $1,345,000

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Chapter 12 Solutions

(2)

To journalize: The adjusting entry as at December 31, 2018, if the fair value adjustment was $145,000, fair value of shares was $1,275,000, and the cost of shares was $1,345,000

(3)

To journalize: The adjusting entry as at December 31, 2018, if the fair value adjustment was $145,000, fair value of shares was $1,375,000, and the cost of shares was $1,345,000