Chapter 12, Problem 12.4BP

(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.

Fair value: Fair value is the price at which, both seller and buyer agree to exchange the asset. So, fair value is the selling price to the seller and the purchase price for the buyer.

Rules of Debit and Credit:

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

• Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.
• Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.

To Record: The transactions of Company W relating to the investments in Company H.

b)

To determine

To Record: The transactions of Company W relating to the investments in Company H.

c)

To determine

To Indicate: The balance sheet and income statement account balances of Company W, under both accounting method as on December 31, 2015.