9th Edition

ISBN: 9781260029901

Author: J. David Spiceland, Mark W. Nelson, Wayne M Thomas

Publisher: McGraw-Hill Education

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Textbook Question

Chapter 12, Problem 12.21E

Error corrections; equity method investment

• LO12-6, LO12-7

On December 12, 2018, an equity investment costing $80,000 was sold for $100,000. The investment was carried in the balance sheet at $75,000, and was accounted for under the equity method. An error was made in which the total of the sale proceeds was credited to the investment account.

Required:

1. Prepare the journal entry to correct the error assuming it is discovered before the books are adjusted or closed in 2018. (Ignore income taxes.)

2. Prepare the journal entry to correct the error assuming it is not discovered until early 2019. (Ignore income taxes.)

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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Chapter 12, Problem 12.20E

Chapter 12, Problem 12.22E

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Chapter 12 Solutions

Loose Leaf Intermediate Accounting

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

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Solution Summary: The author explains the equity 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.

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Chapter 12 Solutions