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 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. 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 correct entry for the change in principle to equity method.

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Answer 1

Question

Chapter 12, Problem 12.18E

a)

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 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.

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 correct entry for the change in principle to equity method.

b)

To determine

To Explain: The other steps taken by Incorporation T, to report the change to equity method.

c)

To determine

To Explain: The difference that would occur, if Incorporation T decided to change from equity method instead of change to equity method.

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Answer 2

Question

Chapter 12, Problem 12.18E

a)

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 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.

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 correct entry for the change in principle to equity method.

b)

To determine

To Explain: The other steps taken by Incorporation T, to report the change to equity method.

c)

To determine

To Explain: The difference that would occur, if Incorporation T decided to change from equity method instead of change to equity method.

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Answer 3

Question

Chapter 12, Problem 12.18E

a)

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 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.

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 correct entry for the change in principle to equity method.

b)

To determine

To Explain: The other steps taken by Incorporation T, to report the change to equity method.

c)

To determine

To Explain: The difference that would occur, if Incorporation T decided to change from equity method instead of change to equity method.

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Answer 4

Question

Chapter 12, Problem 12.18E

a)

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 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.

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 correct entry for the change in principle to equity method.

b)

To determine

To Explain: The other steps taken by Incorporation T, to report the change to equity method.

c)

To determine

To Explain: The difference that would occur, if Incorporation T decided to change from equity method instead of change to equity method.

Expert Solution & Answer

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Answer 5

Chapter 12, Problem 12.18E

a)

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 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.

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 correct entry for the change in principle to equity method.

b)

To determine

To Explain: The other steps taken by Incorporation T, to report the change to equity method.

c)

To determine

To Explain: The difference that would occur, if Incorporation T decided to change from equity method instead of change to equity method.

Answer 6

Chapter 12, Problem 12.18E

a)

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 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.

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 correct entry for the change in principle to equity method.

Answer 7

Chapter 12, Problem 12.18E

a)

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 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.

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 correct entry for the change in principle to equity method.

Answer 8

b)

To determine

To Explain: The other steps taken by Incorporation T, to report the change to equity method.

Answer 9

b)

To determine

To Explain: The other steps taken by Incorporation T, to report the change to equity method.

Answer 10

c)

To determine

To Explain: The difference that would occur, if Incorporation T decided to change from equity method instead of change to equity method.

Answer 11

c)

To determine

To Explain: The difference that would occur, if Incorporation T decided to change from equity method instead of change to equity method.

Answer 12

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Answer 13

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Answer 14

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Answer 15

Ch. 12 - Prob. 12.1Q 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

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To Explain: The other steps taken by Incorporation T, to report the change to equity method.

To Explain: The difference that would occur, if Incorporation T decided to change from equity method instead of change to equity method.

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