Chapter 12, Problem 12.23E

1.

To determine

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.

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.

2. a.

To determine

The amounts to be reported by Company C as an investment in Company C’s 2018 balance sheet.

b.

To determine

The amounts to be reported by Company C as investment revenue in the income statement.

c.

To determine

The amounts to be reported by Company C among investing activities in the statement of cash flows.