Pearson eText Intermediate Accounting -- Instant Access (Pearson+)
3rd Edition
ISBN: 9780136946649
Author: Elizabeth Gordon, Jana Raedy
Publisher: PEARSON+
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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.
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Chapter 16 Solutions
Pearson eText Intermediate Accounting -- Instant Access (Pearson+)
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...
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