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.

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Answer 1

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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.

Chapter 12, Problem 12.24E

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 G as an investment in Company G’s December 31, 2018, balance sheet.

b.

To determine

The amounts to be reported by Company G as investment revenue or loss in Company G’s income statement.

c.

To determine

The amounts to be reported by Company G among investing activities in Company G’s 2018 statement of cash flows.

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Appendix 7.0 Acquisition of BELL CorporationOn 1 January 2017, FIBERBOATS acquired 100% of BELL Corporation. FIBERBOATS issued 50,000 shares of its BD0.600 par ordinary shares, with a market price of BD0.400 on the date the acquisition was announced and BD0.800 on the date the acquisition was completed, for all of BELL Corporation ordinary shares. The book value of net assets of BELL Corporation at the date of acquisition was BD10,000. On that date, the fair value of BELL Corporation assets and liabilities equalled their respective carrying amounts with the exception of property, plant and equipment (PPE) that exceeded its book value by BD120,000. The fair value of BELL’s identifiable intangibles (in-process research and development) is BD70,000. The in-process research and development will be amortized over 5 years. Advise the management of FIBERBOATS on the accounting treatment in relation to the acquisition event that occurred on 1 January 2017 (see appendix 7). Your advice should…

PROBLEM I On January 2, 2020, P Company purchased the net assets of S Company by paying P850,000 cash and issuing shares of stocks at P3,110,000 fair market value. Book value and fair value data on the Statement of Financial Position on January 2, 2020 are as follows: P Company S Company Book Value 4,600,000 1,000,000 1,500,000 1,800,000 Fair Value 4,600,000 1,000,000 1,300,000 1,460,000 Book Value 300,000 980,000 710,000 1,520,000 90,000 3,600,000 3,024,000 Fair Value 300,000 980,000 600,000 1,064,000 80,000 Cash Accounts Receivable Inventory Building, net Goodwill Total 8,900,000 8,360,000 Liabilities Share Capital Share Premium Retained Earnings Total 1,000,000 1,600,000 1,000,000 570,000 900,000 5,400,000 8,900,000 570,000 600,000 960,000 1,470,000 3,600,000 P incurred and paid legal and brokerage fees of P25,600 for business combination; share issue costs of P23,000 indirect acquisition costs. It is determinable that contingency fee of P11,800 would be paid within the year. 1. The…

Problem 3 On January 1, 2021, CPA Co. acquired 15,000 ordinary shares out of 100,000 outstanding ordinary shares of PLDT Inc. for P300,000. The book value of the net asset of PLDT is the same with its fair value. During 2021, PLDT declared P2 per share cash dividend. The net income of PLDT for 2022 is P400,000. On January 1, 2022, CPA Co. acquired additional 5,000 ordinary shares of PLDT Inc. As a result, the cost method of accounting for investment should be replaced by the equity method on January 1, 2022. _2. What is the cumulative effect of this accounting change to January 1, 2022 Retained Earnings assuming income tax rate is 30%? Indicate whether debit or credit.

Answer 2

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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.

Chapter 12, Problem 12.24E

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 G as an investment in Company G’s December 31, 2018, balance sheet.

b.

To determine

The amounts to be reported by Company G as investment revenue or loss in Company G’s income statement.

c.

To determine

The amounts to be reported by Company G among investing activities in Company G’s 2018 statement of cash flows.

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Answer 3

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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.

Chapter 12, Problem 12.24E

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 G as an investment in Company G’s December 31, 2018, balance sheet.

b.

To determine

The amounts to be reported by Company G as investment revenue or loss in Company G’s income statement.

c.

To determine

The amounts to be reported by Company G among investing activities in Company G’s 2018 statement of cash flows.

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Answer 4

Question

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.

Chapter 12, Problem 12.24E

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 G as an investment in Company G’s December 31, 2018, balance sheet.

b.

To determine

The amounts to be reported by Company G as investment revenue or loss in Company G’s income statement.

c.

To determine

The amounts to be reported by Company G among investing activities in Company G’s 2018 statement of cash flows.

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Answer 5

Chapter 12, Problem 12.24E

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 G as an investment in Company G’s December 31, 2018, balance sheet.

b.

To determine

The amounts to be reported by Company G as investment revenue or loss in Company G’s income statement.

c.

To determine

The amounts to be reported by Company G among investing activities in Company G’s 2018 statement of cash flows.

Answer 6

Chapter 12, Problem 12.24E

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.

Answer 7

Chapter 12, Problem 12.24E

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.

Answer 8

2. a.

To determine

The amounts to be reported by Company G as an investment in Company G’s December 31, 2018, balance sheet.

Answer 9

2. a.

To determine

The amounts to be reported by Company G as an investment in Company G’s December 31, 2018, balance sheet.

Answer 10

b.

To determine

The amounts to be reported by Company G as investment revenue or loss in Company G’s income statement.

Answer 11

b.

To determine

The amounts to be reported by Company G as investment revenue or loss in Company G’s income statement.

Answer 12

c.

To determine

The amounts to be reported by Company G among investing activities in Company G’s 2018 statement of cash flows.

Answer 13

c.

To determine

The amounts to be reported by Company G among investing activities in Company G’s 2018 statement of cash flows.

Answer 14

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Answer 15

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Answer 16

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Answer 17

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 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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The amounts to be reported by Company G as an investment in Company G’s December 31, 2018, balance sheet.

The amounts to be reported by Company G as investment revenue or loss in Company G’s income statement.

The amounts to be reported by Company G among investing activities in Company G’s 2018 statement of cash flows.

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