The journal entry to record the acquisition of investments.

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Answer 1

Question

Chapter 16, Problem 16.9E

a.

To determine

The journal entry to record the acquisition of investments.

b.

To determine

To prepare: The journal entry to record the interest and dividend income at year-end assuming that G Company receives the dividends on preferred shares.

c.

To determine

To prepare: The journal entries to adjust the carrying amount of the investments to their fair values at the end of the first year.

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JH, Inc., is a calendar year, accrual basis corporation with Joe as its sole shareholder (basis in his stock is $90,000). On January 1 of the current year, JH Corporation has accumulated E & P of $200,000. Before considering the effect of the distribution described below, the corporation’s current E & P is $50,000. On November 1, JH distributes an office building to Joe. The office building has an adjusted basis of $80,000 (fair market value of $100,000) and is subject to a mortgage of $110,000. Assume that the building has been depreciated using the ADS method for both income tax and E & P purposes. What are the tax consequences of the distribution to JH and to Joe? (In your answer, be sure to describe the effects on taxable income for both JH and Joe, the impact of the distribution on JH’s E & P, and Joe’s basis in the building.)

Joe is the sole shareholder of JH Corporation. Joe sold his stock to Ethan on October 31 for $150,000. Joe’s basis in JH stock was $50,000 at the start of the year. JH distributed land to Joe immediately before the sale. JH’s basis in the land was $20,000 (fair market value of $25,000). On December 31, Ethan received a $75,000 cash distribution from JH. During the year, JH has $20,000 of current E & P and its accumulated E & P balance on January 1 is $10,000. Which of the following statements is true? a. Joe recognizes a $110,000 gain on the sale of his stock. b. Joe recognizes a $100,000 gain on the sale of his stock. c. Ethan receives $5,000 of dividend income.d. Joe receives $20,000 of dividend income. e. None of the above.

Answer 2

Question

Chapter 16, Problem 16.9E

a.

To determine

The journal entry to record the acquisition of investments.

b.

To determine

To prepare: The journal entry to record the interest and dividend income at year-end assuming that G Company receives the dividends on preferred shares.

c.

To determine

To prepare: The journal entries to adjust the carrying amount of the investments to their fair values at the end of the first year.

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Answer 3

Question

Chapter 16, Problem 16.9E

a.

To determine

The journal entry to record the acquisition of investments.

b.

To determine

To prepare: The journal entry to record the interest and dividend income at year-end assuming that G Company receives the dividends on preferred shares.

c.

To determine

To prepare: The journal entries to adjust the carrying amount of the investments to their fair values at the end of the first year.

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Answer 4

Question

Chapter 16, Problem 16.9E

a.

To determine

The journal entry to record the acquisition of investments.

b.

To determine

To prepare: The journal entry to record the interest and dividend income at year-end assuming that G Company receives the dividends on preferred shares.

c.

To determine

To prepare: The journal entries to adjust the carrying amount of the investments to their fair values at the end of the first year.

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Answer 5

Chapter 16, Problem 16.9E

a.

To determine

The journal entry to record the acquisition of investments.

b.

To determine

To prepare: The journal entry to record the interest and dividend income at year-end assuming that G Company receives the dividends on preferred shares.

c.

To determine

To prepare: The journal entries to adjust the carrying amount of the investments to their fair values at the end of the first year.

Answer 6

Chapter 16, Problem 16.9E

a.

To determine

The journal entry to record the acquisition of investments.

Answer 7

Chapter 16, Problem 16.9E

a.

To determine

The journal entry to record the acquisition of investments.

Answer 8

b.

To determine

To prepare: The journal entry to record the interest and dividend income at year-end assuming that G Company receives the dividends on preferred shares.

Answer 9

b.

To determine

To prepare: The journal entry to record the interest and dividend income at year-end assuming that G Company receives the dividends on preferred shares.

Answer 10

c.

To determine

To prepare: The journal entries to adjust the carrying amount of the investments to their fair values at the end of the first year.

Answer 11

c.

To determine

To prepare: The journal entries to adjust the carrying amount of the investments to their fair values at the end of the first year.

Answer 12

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Answer 13

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Answer 14

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Answer 15

Ch. 16 - Prob. 16.1Q Ch. 16 - Is reporting an investment at its cost considered...Ch. 16 - Prob. 16.3Q Ch. 16 - Prob. 16.4Q Ch. 16 - Prob. 16.5Q Ch. 16 - Prob. 16.6Q Ch. 16 - What categories can managers use to classify...Ch. 16 - When is the equity method of accounting for...Ch. 16 - Prob. 16.9Q Ch. 16 - Can companies apply the fair value option to all...

The journal entry to record the acquisition of investments.

Solution Summary: The author explains the International Financial Reporting Standards, which establish a common language to be used in business affairs.

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The journal entry to record the acquisition of investments.

To prepare: The journal entry to record the interest and dividend income at year-end assuming that G Company receives the dividends on preferred shares.

To prepare: The journal entries to adjust the carrying amount of the investments to their fair values at the end of the first year.

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Chapter 16 Solutions