INTERMEDIATE ACCOUNTING-MYLAB W/ETEXT
3rd Edition
ISBN: 9780136946601
Author: GORDON
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 16, Problem 16.4P
Equity Investments, Readily Determinable Fair Value. DeNault Aircraft Corporation acquired the following equity investments at the beginning of Year 1 to be held in a portfolio. DeNault does not have significant influence over the investees.
| Description | Revere Group | Belton Brothers | Yan-Co Associates | Lopes Company |
| Number of shares | 100,100 | 98,000 | 45,000 | 69,500 |
| Market price per share | × $23 | × $11 | × $16 | × $68 |
| Share acquisition price | $2,302,300 | $1,078,000 | $720,000 | $4,726,000 |
Share prices at the end of Years 1 and 2 follow.
| Fair Value | Revere Group | Belton Brothers | Yan-Co Associates |
Lopes Company |
| End of Year 1 | $26 | $9 | $21 | $59 |
| End of Year 2 | $18 | $6 | $25 | $51 |
Required
- a. Prepare the
journal entry to record the acquisition of the investments. - b. Prepare the journal entry to record the end of Year 1 fair value adjustment for the portfolio.
- c. Assume that DeNault sells 35,000 Yan-Co shares for $23 per share at the beginning of Year 2. Prepare the journal entry required to record the sale. DeNault does not adjust the fair value adjustment account at this time.
- d. Prepare the journal entry to record the Year 2 fair value adjustment.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Investments in Stocks - This portfolio is composed of GKKB Company shares (GanyanKabaKatigasBash) and ABC Company shares. The shares were not held for trading and management has elected to designate the investments at fair value through other comprehensive income.
Date
Account
Debit
Credit
May 3, 2020
Investment in GKKB Company
25,250
Broker's fee
1,000
Cash
26,250
To record the acquisition of GKKB shares and its related transaction cost
Investment in ABC Company
32,450
Cash
32,450
To record the acquisition of ABC shares, acquired at P32.45 per share
December 31, 2020
Unrealized Gain / (Loss) on market changes
400
Investment in ABC Company
1,500
Investment in GKKB Company
1,900
To record the market value adjustment for 2020
May 28, 2021
Investment in ABC Company
5,000
Dividend income
5,000…
The following data pertains to Traverse Co.'s investments in marketable equity securities:
Select one:
Oa. $55,000 gain
O b. $55,000 loss
c. $50,000 loss
Od $50,000 gain
Oe $0
Cost
$150,000
Clear my choice
Market value
12/31/24
$155,000
12/31/25
What amount should Traverse Co. report as unrealized holding gain/loss to be included in 2025 Comprehensive Income?
$100,000
1. On January 3, 2020, Castle Corporation purchased the following equity securities as an investment:
Number of
Cost of
Total
Company
Shares
Share
$20
Cost
$ 8,000
24,000
600 ,7ב
400
2,000
800
B
12
22
These securities are classified as available for sale.
Required:
a. Prepare the journal entry to record the acquisition of the stock.
b. On June 30, 2020, C Company paid dividends of $3.00 per share. Prepare the journal
entry that would be used by Castle to record the dividend receipt.
c. On December 31, 2020, the market values per share were:
Company
Market Value
A
$22
B
12
20
Prepare any journal entry or entries necessary to record these changes in market value.
d. On March 14, 2021, Castle sold 800 shares of C Company for $18 per share. Prepare
the journal entry to record the sale.
Chapter 16 Solutions
INTERMEDIATE ACCOUNTING-MYLAB W/ETEXT
Ch. 16 - Prob. 16.1QCh. 16 - Is reporting an investment at its cost considered...Ch. 16 - Prob. 16.3QCh. 16 - Prob. 16.4QCh. 16 - Prob. 16.5QCh. 16 - Prob. 16.6QCh. 16 - What categories can managers use to classify...Ch. 16 - When is the equity method of accounting for...Ch. 16 - Prob. 16.9QCh. 16 - Can companies apply the fair value option to all...
Ch. 16 - What is the fair value hierarchy for investment...Ch. 16 - Prob. 16.12QCh. 16 - Prob. 16.13QCh. 16 - Prob. 16.14QCh. 16 - Prob. 16.15QCh. 16 - Prob. 16.16QCh. 16 - Prob. 16.17QCh. 16 - Deutsch Imports has three securities in its...Ch. 16 - Prob. 16.2MCCh. 16 - Prob. 16.3MCCh. 16 - Prob. 16.4MCCh. 16 - Prob. 16.5MCCh. 16 - Prob. 16.6MCCh. 16 - Prob. 16.7MCCh. 16 - Prob. 16.1BECh. 16 - Prob. 16.2BECh. 16 - Debt Investments, Trading. Using the information...Ch. 16 - Prob. 16.4BECh. 16 - Prob. 16.5BECh. 16 - Prob. 16.6BECh. 16 - Prob. 16.7BECh. 16 - Prob. 16.8BECh. 16 - Prob. 16.9BECh. 16 - Prob. 16.10BECh. 16 - Prob. 16.11BECh. 16 - Prob. 16.12BECh. 16 - Prob. 16.13BECh. 16 - Notes Receivable. Aaron Anatole accepted a...Ch. 16 - Prob. 16.15BECh. 16 - Prob. 16.16BECh. 16 - Prob. 16.17BECh. 16 - Debt Investments. Impairments. IFRS. For each debt...Ch. 16 - Prob. 16.19BECh. 16 - Prob. 16.1ECh. 16 - Prob. 16.2ECh. 16 - Prob. 16.3ECh. 16 - Prob. 16.4ECh. 16 - Prob. 16.5ECh. 16 - Prob. 16.6ECh. 16 - Prob. 16.7ECh. 16 - Debt and Equity Investments, Available-for-Sale...Ch. 16 - Prob. 16.9ECh. 16 - Equity Investments without a Readily Determinable...Ch. 16 - Prob. 16.11ECh. 16 - Prob. 16.12ECh. 16 - Prob. 16.13ECh. 16 - Equity-Investments, Equity Method. Book Value of...Ch. 16 - Prob. 16.15ECh. 16 - Prob. 16.16ECh. 16 - Notes Receivable. Each of the following three...Ch. 16 - Prob. 16.18ECh. 16 - Prob. 16.19ECh. 16 - Prob. 16.20ECh. 16 - Prob. 16.21ECh. 16 - Prob. 16.22ECh. 16 - Prob. 16.23ECh. 16 - Prob. 16.24ECh. 16 - Prob. 16.25ECh. 16 - Prob. 16.1PCh. 16 - Debt Investments, Trading. Freder Software Group...Ch. 16 - Prob. 16.3PCh. 16 - Equity Investments, Readily Determinable Fair...Ch. 16 - Prob. 16.5PCh. 16 - Prob. 16.6PCh. 16 - Prob. 16.7PCh. 16 - Prob. 16.8PCh. 16 - Prob. 16.9PCh. 16 - Prob. 16.10PCh. 16 - Prob. 16.11PCh. 16 - Equity Investments, Equity Method, Fair Value...Ch. 16 - Prob. 16.13PCh. 16 - Prob. 16.14PCh. 16 - Prob. 16.15PCh. 16 - Prob. 16.16PCh. 16 - Prob. 16.17PCh. 16 - Prob. 16.18PCh. 16 - Prob. 16.19PCh. 16 - Prob. 1JCCh. 16 - Prob. 2JCCh. 16 - Prob. 1SSCCh. 16 - Prob. 1BCCCh. 16 - Prob. 2BCC
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- #4 PLEASE ANSWER PARTS D) and E) Recording and Reporting Equity Investment: FV-NI Adjust FVA at Sale and Year-End On November 1, 2020, Drucker Co. acquired the following investments in equity securities measured at FV‑NI.Kelly Corporation—750 shares of common stock (no-par) at $60 per share. Keefe Corporation—450 shares preferred stock ($10 par) at $20 per share. On December 31, 2020, the company’s year-end, the quoted market prices were as follows: Kelly Corporation common stock, $52, and Keefe Corporation preferred stock, $24. Following are the data for 2021. Mar. 2, 2021 Dividends per share, declared and paid: Kelly Corp., $1, and Keefe Corp., $0.50.Oct. 1, 2021 Sold 150 shares of Keefe Corporation preferred stock at $25 per share.Dec. 31, 2021 Fair values: Kelly common, $46 per share, Keefe preferred, $26 per share.arrow_forward1. The cost method of accounting for stock investments is used when the company acquires a. Greater than 50% of the company's stock b. Between 20% to 50% of the company's stock c. Less than 20% of the company's stock 2. The significance of percentage of ownership relates to how much _____________ the acquiring company has in the new company. a. data b. control c. confidencearrow_forwardEquity and Available-for-Sale Investments O'Brien Industries Inc. is a book publisher. The availlable-for-sale investments at cost and fair value on December 31, 20Y4, are as follows: Issuing Company Cost Fair Value Bernard Co. $16,000 $14,600 Chadwick Co. 31,500 29,500 $47,500 $44,100 The investment in Jolly Roger Co. stock represents 30% of the outstanding shares of Jolly Roger Co. The following selected transactions occurred during 20Y5: Jan. 2. Purchased $34,200 of Gozar Inc. 5%, 10-year bonds at 100. The bonds are classified as an vailable-for- sale investment. The bonds pay Interest'on June 30 and December 31. June Received interest for 6 months on the Gozar Inc. 30. bonds purchased on January 2. Oct, 1. Purchased $27,000 of Nightline Co. 5%, 10-year bonds at 100, The bonds are classified as an available-for-sale investment. The bonds pay interest on October 1 and April 1. Dividends of $7,900 are received on the Jolly Roger 9. Co, investment. Dec. 31. Jolly Roger Co. reported a…arrow_forward
- Equity securities acquired by a corporation which are accounted for by recognizing unrealized holding gains or losses as part of the net income are: Securities where a company has holdings of between 20% and 50% Securities where a company has holding of less than 20% O Available-for-sale securities where a company has holdings of less than 20% O Securities where a company has holdings of more than 50%arrow_forwardCompany A buys 15% of common stocks of Company B. Company A provides financial support to Company B, which is unavailable to finance its activities. Company A should record its investment in Company B as: a. Available for sale investment b. Trading investment c. As Investment using the equity method d. As Investment preparing consolidated financial statementsarrow_forwardoptions for a: Available-for-sale Investments, at cost cash Retained Earnings Unrealized gain(loss) on available-for-sale Investments Valuation Allowance for available-for-sale Investments options for b first slot is yes or no Second slot is as other revenue/expense or in the stockholder equity sectionarrow_forward
- 50Equity securities acquired by a corporation which are accounted for by reporting unrealized holding gain/loss in the equity section of the statement of financial position. a. Investment at FVPL where a company has holdings of less than 20% b. Investment at FVOCI where a company has holdings of less than 20% c. Investment where a company has holdings of between 20% and 50% d. Investment where a company has holdings of more than 50%arrow_forwardFair value journal entries, trading investmentsThe investments of Charger Inc. include a single investment: 14,500shares of Raiders Inc. common stock purchased on February 24, Year 1,for $38 per share including brokerage commission. These shares werelassified as trading securities. As of the December 31, Year 1, balancesheet date, the share price had increased to $42 per share. a. Journalize the entries to acquire the investment on February 24 andrecord the adjustment to fair value on December 31, Year 1.b. How is the unrealized gain or loss for trading investments reported onthe financial statements?arrow_forwardPlease do not give solution in image format ?arrow_forward
- Fair Value Journal Entries, Available-for-Sale Investments The investments of Steelers Inc. include a single investment: 8,900 shares of Bengals Inc. common stock purchased on September 12, Year 1, for $8 per share including brokerage commission. These shares were classified as available-for-sale securities. As of the December 31, Year 1, balance sheet date, the share price declined to $6 per share. a. Journalize the entries to acquire the investment on September 12 and record the adjustment to fair value on December 31, Year 1. Year 1 Sept. 12 Year 1 Dec. 31 b. How is the unrealized gain or loss for available-for-sale investments disclosed on the financial statements? Unrealized Gain (Loss) on Available-for-Sale Investments is reported in the of thearrow_forwardPlease help me, I will neatly upvote your answerarrow_forwardHow much is the shareholder's equity?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Financial AccountingAccountingISBN:9781305088436Author:Carl Warren, Jim Reeve, Jonathan DuchacPublisher:Cengage Learning
Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning
Financial Accounting
Accounting
ISBN:9781305088436
Author:Carl Warren, Jim Reeve, Jonathan Duchac
Publisher:Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning
Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning
Financial instruments products; Author: fi-compass;https://www.youtube.com/watch?v=gvxozM3TUIg;License: Standard Youtube License