Cost method : It refers to an accounting technique used by an investor to determine the income earned on investments made in short-term equity securities of a company. Thus, the investor who own a non-significant interest by having less than 20% of ownership, accounts for investments in short-term equity securities under this method. Equity method : It refers to an accounting technique used by an investor to determine the income earned on investments made in long-term equity securities of a company. Thus, the investor who owns a significant interest by having more than 20%, but less than 50% of ownership, accounts for investments in long-term equity securities under this method. To prepare: The journal entries in the books of Company F for 2014, using cost method.

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Answer 1

Question

Chapter AE, Problem AE.4P

(a)

To determine

Cost method: It refers to an accounting technique used by an investor to determine the income earned on investments made in short-term equity securities of a company. Thus, the investor who own a non-significant interest by having less than 20% of ownership, accounts for investments in short-term equity securities under this method.

Equity method: It refers to an accounting technique used by an investor to determine the income earned on investments made in long-term equity securities of a company. Thus, the investor who owns a significant interest by having more than 20%, but less than 50% of ownership, accounts for investments in long-term equity securities under this method.

To prepare: The journal entries in the books of Company F for 2014, using cost method.

(b)

To determine

To prepare: The journal entries in the books of Company F for 2014, using equity method.

(c)

To determine

To Prepare: A memorandum and explain each method, and show the account balance under each method at December 31, 2014 in a tabular form.

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Answer 2

Question

Chapter AE, Problem AE.4P

(a)

To determine

Cost method: It refers to an accounting technique used by an investor to determine the income earned on investments made in short-term equity securities of a company. Thus, the investor who own a non-significant interest by having less than 20% of ownership, accounts for investments in short-term equity securities under this method.

Equity method: It refers to an accounting technique used by an investor to determine the income earned on investments made in long-term equity securities of a company. Thus, the investor who owns a significant interest by having more than 20%, but less than 50% of ownership, accounts for investments in long-term equity securities under this method.

To prepare: The journal entries in the books of Company F for 2014, using cost method.

(b)

To determine

To prepare: The journal entries in the books of Company F for 2014, using equity method.

(c)

To determine

To Prepare: A memorandum and explain each method, and show the account balance under each method at December 31, 2014 in a tabular form.

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Answer 3

Question

Chapter AE, Problem AE.4P

(a)

To determine

Cost method: It refers to an accounting technique used by an investor to determine the income earned on investments made in short-term equity securities of a company. Thus, the investor who own a non-significant interest by having less than 20% of ownership, accounts for investments in short-term equity securities under this method.

Equity method: It refers to an accounting technique used by an investor to determine the income earned on investments made in long-term equity securities of a company. Thus, the investor who owns a significant interest by having more than 20%, but less than 50% of ownership, accounts for investments in long-term equity securities under this method.

To prepare: The journal entries in the books of Company F for 2014, using cost method.

(b)

To determine

To prepare: The journal entries in the books of Company F for 2014, using equity method.

(c)

To determine

To Prepare: A memorandum and explain each method, and show the account balance under each method at December 31, 2014 in a tabular form.

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Answer 4

Question

Chapter AE, Problem AE.4P

(a)

To determine

Cost method: It refers to an accounting technique used by an investor to determine the income earned on investments made in short-term equity securities of a company. Thus, the investor who own a non-significant interest by having less than 20% of ownership, accounts for investments in short-term equity securities under this method.

Equity method: It refers to an accounting technique used by an investor to determine the income earned on investments made in long-term equity securities of a company. Thus, the investor who owns a significant interest by having more than 20%, but less than 50% of ownership, accounts for investments in long-term equity securities under this method.

To prepare: The journal entries in the books of Company F for 2014, using cost method.

(b)

To determine

To prepare: The journal entries in the books of Company F for 2014, using equity method.

(c)

To determine

To Prepare: A memorandum and explain each method, and show the account balance under each method at December 31, 2014 in a tabular form.

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Answer 5

Chapter AE, Problem AE.4P

(a)

To determine

Cost method: It refers to an accounting technique used by an investor to determine the income earned on investments made in short-term equity securities of a company. Thus, the investor who own a non-significant interest by having less than 20% of ownership, accounts for investments in short-term equity securities under this method.

Equity method: It refers to an accounting technique used by an investor to determine the income earned on investments made in long-term equity securities of a company. Thus, the investor who owns a significant interest by having more than 20%, but less than 50% of ownership, accounts for investments in long-term equity securities under this method.

To prepare: The journal entries in the books of Company F for 2014, using cost method.

(b)

To determine

To prepare: The journal entries in the books of Company F for 2014, using equity method.

(c)

To determine

To Prepare: A memorandum and explain each method, and show the account balance under each method at December 31, 2014 in a tabular form.

Answer 6

Chapter AE, Problem AE.4P

(a)

To determine

Cost method: It refers to an accounting technique used by an investor to determine the income earned on investments made in short-term equity securities of a company. Thus, the investor who own a non-significant interest by having less than 20% of ownership, accounts for investments in short-term equity securities under this method.

Equity method: It refers to an accounting technique used by an investor to determine the income earned on investments made in long-term equity securities of a company. Thus, the investor who owns a significant interest by having more than 20%, but less than 50% of ownership, accounts for investments in long-term equity securities under this method.

To prepare: The journal entries in the books of Company F for 2014, using cost method.

Answer 7

Chapter AE, Problem AE.4P

(a)

To determine

Cost method: It refers to an accounting technique used by an investor to determine the income earned on investments made in short-term equity securities of a company. Thus, the investor who own a non-significant interest by having less than 20% of ownership, accounts for investments in short-term equity securities under this method.

Equity method: It refers to an accounting technique used by an investor to determine the income earned on investments made in long-term equity securities of a company. Thus, the investor who owns a significant interest by having more than 20%, but less than 50% of ownership, accounts for investments in long-term equity securities under this method.

To prepare: The journal entries in the books of Company F for 2014, using cost method.

Answer 8

(b)

To determine

To prepare: The journal entries in the books of Company F for 2014, using equity method.

Answer 9

(b)

To determine

To prepare: The journal entries in the books of Company F for 2014, using equity method.

Answer 10

(c)

To determine

To Prepare: A memorandum and explain each method, and show the account balance under each method at December 31, 2014 in a tabular form.

Answer 11

(c)

To determine

To Prepare: A memorandum and explain each method, and show the account balance under each method at December 31, 2014 in a tabular form.

Answer 12

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Answer 13

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Answer 14

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Answer 15

Ch. AE - Prob. 1Q Ch. AE - Prob. 2Q Ch. AE - 3. Jill Glendo is confused about losses and gains...Ch. AE - Prob. 4Q Ch. AE - What is the cost of an investment in stock?Ch. AE - Prob. 6Q Ch. AE - Prob. 7Q Ch. AE - Prob. 8Q Ch. AE - Prob. 9Q Ch. AE - Distinguish between the cost and equity methods of...

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To prepare: The journal entries in the books of Company F for 2014, using equity method.

To Prepare: A memorandum and explain each method, and show the account balance under each method at December 31, 2014 in a tabular form.

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Chapter AE Solutions