LOOSE-LEAF Advanced Financial Accounting with Connect
11th Edition
ISBN: 9781259605192
Author: Theodore E. Christensen
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 4, Problem 4.1E
a.
To determine
Introduction: Investment is the asset that is acquired for the generation of income or return in the long run. Investments are used to create capital for future utilization. The
To prepare:
a.
Expert Solution
Explanation of Solution
In the books of Company R:
Record of purchase of common stock:
| Date | Account | Debit ($) | Credit($) |
| 20X5 | Investment in Company S Common Stock | 270,000 | |
| Cash | 270,000 | ||
| (To record purchase of common stock) |
Table (1)
- Investment in Company S common stock is an asset and it is increased by $270,000. Therefore, Investment in Company S common stock account is debited with $270,000.
- Cash is an asset and it is decreased by $270,000. Therefore, the cash account is credited with $270,000.
Record dividend income received:
| Date | Account | Debit ($) | Credit($) |
| 20X5 | Cash | 5,000 | |
| Dividend Income | 5,000 | ||
| (To record dividend income) |
Table (2)
- Cash is an asset and it is increased by $5,000. Therefore, the cash account is debited with $5,000.
- Dividend income is income and it is increased by $5,000. Therefore, Dividend income account is credited with $5,000.
Record dividend income received:
| Date | Account | Debit ($) | Credit($) |
| 20X6 | Cash | 15,000 | |
| Dividend Income | 15,000 | ||
| (To record dividend income) |
Table (3)
- Cash is an asset and it is increased by $15,000. Therefore, the cash account is debited with $15,000.
- Dividend income is income and it is increased by $15,000. Therefore, Dividend income account is credited with $15,000.
Record dividend income received:
| Date | Account | Debit ($) | Credit($) |
| 20X7 | Cash | 35,000 | |
| Dividend Income | 35,000 | ||
| (To record dividend income) |
Table (4)
- Cash is an asset and it is increased by $35,000. Therefore, the cash account is debited with $35,000.
- Dividend income is income and it is increased by $35,000. Therefore, Dividend income account is credited with $35,000.
b.
To determine
Introduction: Investment is the asset that is acquired for the generation of income or return in the long run. Investments are used to create capital for future utilization. The return obtained from investments is used in operations of the business.
To prepare: Journal entries that Company R would record for investment in Company S using the equity method.
b.
Expert Solution
Explanation of Solution
In the books of Company R:
Record of purchase of common stock:
| Date | Account | Debit ($) | Credit($) |
| 20X5 | Investment in Company S Common Stock | 270,000 | |
| Cash | 270,000 | ||
| (To record purchase of common stock) |
Table (1)
- Investment in Company S common stock is an asset and it is increased by $270,000. Therefore, Investment in Company S common stock account is debited with $270,000.
- Cash is an asset and it is decreased by $270,000. Therefore, the cash account is credited with $270,000.
Record dividend income received:
| Date | Account | Debit ($) | Credit($) |
| 20X5 | Cash | 5,000 | |
| Investment in Company S Common Stock | 5,000 | ||
| (To record dividend income) |
Table (2)
- Cash is an asset and it is increased by $5,000. Therefore, the cash account is debited with $5,000.
- Investment in Company S common stock is an asset and it is decreased by $5,000. Therefore, Investment in Company S common stock account is credited with $5,000.
Record equity-method income:
| Date | Account | Debit ($) | Credit($) |
| 20X5 | Investment in Company S Common Stock | 20,000 | |
| Investment in Company S | 20,000 | ||
| (To record equity-method income) |
Table (3)
- Investment in Company S common stock is an asset and it is increased by $20,000. Therefore, Investment in Company S common stock account is debited with $20,000.
- Investment in Company S is income and it is increased by $20,000. Therefore, Investment in Company S account is credited with $20,000.
Record amortization amount:
| Date | Account | Debit ($) | Credit($) |
| 20X5 | Investment in Company S | 7,000 | |
| Investment in Company S Common Stock | 7,000 | ||
| (To record amortization amount) |
Table (4)
- Investment in Company S is income and it is decreased by $7,000. Therefore, investment in Company S account is debited with $7,000.
- Investment in Company S common stock is an asset and it is decreased by $7,000. Therefore, investment in Company S common stock account is credited with $7,000.
Record dividend income received:
| Date | Account | Debit ($) | Credit($) |
| 20X6 | Cash | 15,000 | |
| Dividend Income | 15,000 | ||
| (To record dividend income) |
Table (5)
- Cash is an asset and it is increased by $15,000. Therefore, the cash account is debited with $15,000.
- Dividend income is income and it is increased by $15,000. Therefore, Dividend income account is credited with $15,000.
Record equity-method income:
| Date | Account | Debit ($) | Credit($) |
| 20X6 | Investment in Company S Common Stock | 40,000 | |
| Investment in Company S | 40,000 | ||
| (To record equity-method income) |
Table (6)
- Investment in Company S common stock is an asset and it is increased by $40,000. Therefore, Investment in Company S common stock account is debited with $40,000.
- Investment in Company S is income and it is increased by $40,000. Therefore, Investment in Company S account is credited with $40,000.
Record amortization amount:
| Date | Account | Debit ($) | Credit($) |
| 20X6 | Investment in Company S | 7,000 | |
| Investment in Company S Common Stock | 7,000 | ||
| (To record amortization amount) |
Table (7)
- Investment in Company S is income and it is decreased by $7,000. Therefore, investment in Company S account is debited with $7,000.
- Investment in Company S common stock is an asset and it is decreased by $7,000. Therefore, investment in Company S common stock account is credited with $7,000.
Record dividend income received:
| Date | Account | Debit ($) | Credit($) |
| 20X7 | Cash | 35,000 | |
| Investment in Company S Common Stock | 35,000 | ||
| (To record dividend income) |
Table (8)
- Cash is an asset and it is increased by $35,000. Therefore, the cash account is debited with $35,000.
- Investment in Company S common stock is an asset and it is decreased by $35,000. Therefore, Investment in Company S common stock account is credited with $35,000.
Record equity-method income:
| Date | Account | Debit ($) | Credit($) |
| 20X7 | Investment in Company S Common Stock | 20,000 | |
| Investment in Company S | 20,000 | ||
| (To record equity-method income) |
Table (9)
- Investment in Company S common stock is an asset and it is increased by $20,000. Therefore, Investment in Company S common stock account is debited with $20,000.
- Investment in Company S is income and it is increased by $20,000. Therefore, Investment in Company S account is credited with $20,000.
Record amortization amount:
| Date | Account | Debit ($) | Credit($) |
| 20X7 | Investment in Company S | 7,000 | |
| Investment in Company S Common Stock | 7,000 | ||
| (To record amortization amount) |
Table (10)
- Investment in Company S is income and it is decreased by $7,000. Therefore, investment in Company S account is debited with $7,000.
- Investment in Company S common stock is an asset and it is decreased by $7,000. Therefore, investment in Company S common stock account is credited with $7,000.
Want to see more full solutions like this?
Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
Delta's inventory records for February reflect the following details: On February 1, the beginning inventory consisted of 250 units priced at $3.20 each. On February 9, Delta made its first purchase of 350 units at a cost of $3.50 each. A second purchase was made on February 18, consisting of 500 units priced at $3.70 each. By the end of the month, on February 28, Delta sold 700 units at a price of $6.50 per unit. Using the FIFO (First-In, First-Out) cost flow method, what is the cost of goods sold (COGS) for February?
Please explain the solution to this general accounting problem with accurate principles.
Please explain how to solve this financial accounting question with valid financial principles.
Chapter 4 Solutions
LOOSE-LEAF Advanced Financial Accounting with Connect
Ch. 4 - When is the carrying value of the investment...Ch. 4 - What is a differential? How is a differential...Ch. 4 - Prob. 4.3QCh. 4 - Prob. 4.4QCh. 4 - Prob. 4.5QCh. 4 - Prob. 4.6QCh. 4 - Prob. 4.7QCh. 4 - Prob. 4.8QCh. 4 - Prob. 4.9QCh. 4 - Prob. 4.10Q
Ch. 4 - Prob. 4.11QCh. 4 - What determines whether the balance assigned to...Ch. 4 - What does the termpushdown accountingmean?Ch. 4 - Under what conditions is push-down accounting...Ch. 4 - Prob. 4.15QCh. 4 - Reporting Significant Investments in Common Stock...Ch. 4 - Prob. 4.2CCh. 4 - Prob. 4.3CCh. 4 - Prob. 4.4CCh. 4 - Prob. 4.5CCh. 4 - Prob. 4.1ECh. 4 - Prob. 4.2ECh. 4 - Prob. 4.3ECh. 4 - Prob. 4.4ECh. 4 - Prob. 4.5ECh. 4 - Prob. 4.6ECh. 4 - Prob. 4.7ECh. 4 - Prob. 4.8ECh. 4 - Prob. 4.9ECh. 4 - Prob. 4.10.1ECh. 4 - Prob. 4.10.2ECh. 4 - Prob. 4.10.3ECh. 4 - Prob. 4.10.4ECh. 4 - Prob. 4.10.5ECh. 4 - Prob. 4.11.1ECh. 4 - Prob. 4.11.2ECh. 4 - Prob. 4.11.3ECh. 4 - Prob. 4.11.4ECh. 4 - Prob. 4.12ECh. 4 - Prob. 4.13ECh. 4 - Prob. 4.14ECh. 4 - Prob. 4.15ECh. 4 - Prob. 4.16ECh. 4 - Prob. 4.17ECh. 4 - Prob. 4.18.1ECh. 4 - Prob. 4.18.2ECh. 4 - Prob. 4.18.3ECh. 4 - Prob. 4.18.4ECh. 4 - Prob. 4.18.5ECh. 4 - Prob. 4.18.6ECh. 4 - Prob. 4.19ECh. 4 - Prob. 4.30PCh. 4 - Prob. 4.33PCh. 4 - Prob. 4.35PCh. 4 - Prob. 4.36PCh. 4 - Prob. 4.37AP
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
- Veloid Ltd. has Assets of $312,480 and Liabilities of $95,165. The firm has 11,920 shares of stock outstanding. Then the board decides to pay a dividend of $10.50 per share. What is the value of Stockholders' Equity after the payment of the dividend?arrow_forwardShri Manufacturing has estimated total factory overhead costs of $625,000 and 25,000 direct labor hours for the current fiscal year. If direct labor hours for the year total 23,500 and actual factory overhead totals $610,000, what is the amount of overapplied or underapplied overhead for the year? Helparrow_forwardWhat is the correct answer with accounting questionarrow_forward
- Please solve this general accounting problem an given step by step explanationarrow_forwardBeacon Manufacturing has $85,000 in assets. They also have $32,000 in liabilities and $8,500 in expenses, and they paid out $6,200 in dividends this year. The extended accounting equation is assets = liabilities + (revenue - (expenses + dividends)). What would their revenue need to be for their accounts to be in balance?arrow_forwardThe Patidar Group manufactures and sells a single product, Product T. Budgeted sales for June are $450,000. Gross Margin is budgeted at 35% of sales dollars. If the net income for June is budgeted at $62,500, the budgeted selling and administrative expenses are?arrow_forward
- Can you explain the correct methodology to solve this financial accounting problem?arrow_forwardCan you help me solve this general accounting question using the correct accounting procedures?arrow_forwardI need help with this general accounting question using standard accounting techniques.arrow_forward
- Can you help me solve this general accounting problem using the correct accounting process?arrow_forwardShri Manufacturing has estimated total factory overhead costs of $625,000 and 25,000 direct labor hours for the current fiscal year. If direct labor hours for the year total 23,500 and actual factory overhead totals $610,000, what is the amount of overapplied or underapplied overhead for the year?arrow_forwardSolve this General accounting problemarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning