Homework Answers
8. Answer: b. by using the fair value method.
Since Goebel’s shareholding in Dobbs Company does not represent significant influence over Dobbs but rather a passive interest, the fair value method should be used for accounting for the investment in Dobbs.
9. Answer: c. $350,000
On December 31, 2018, the Equity Investment (Dobbs) would be reflected at the cost at which acquired on the same date which is $350,000.
10. Answer: c. Dividend revenue of $12,000
The cash dividends received from Dobbs 20% x $60,000 = $12,000 would be recorded by Goebel as dividend revenue.
11. Answer: a. $0
The net income reported by Dobbs will not affect the carrying value of the Equity Investments (Dobbs)
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II. Problem Set 1 with Options (Total 39 pts.; 3 pts each) Goebel Company purchased outstanding...
Situation 1: Goebel Company acquired a 20% interest in Dobbs Company on December 31, 2018 for...
Situation 1: Goebel Company acquired a 20% interest in Dobbs Company on December 31, 2018 for $350,000. During 2019 Dobbs Company had net income of $150,000 and paid a cash dividend of $60,000. (Dobbs Company paid $60,000 cash dividend to all of its shareholders.) 12. Based on the information regarding Goebel's investment in Dobbs Company: Fair Value 12/31/18 12/31/19 $350,000 $365,000 Cost $350,000 Equity investment If the Fair Value Adjustment has a debit balance of $8,000, what amount of unrealized...
Situation 2: Goebel Company acquired a 30% interest in Dobbs Company on December 31, 2018 for...
Situation 2: Goebel Company acquired a 30% interest in Dobbs Company on December 31, 2018 for $350,000. During 2019 Dobbs Company had net income of $150,000 and paid a cash dividend of $60,000. (Dobbs Company paid $60,000 cash dividend to all of its shareholders.) 18. The beginning balance in the investment account in Dobbs Company was $350,000, the balance at December 31, 2019 should be a. $332,000. b. $350,000. c. $377,000. d. $395,000 Goebel should report investment income for 2019...
Situation 2: Goebel Company acquired a 30% interest in Dobbs Company on December 31, 2018 for...
Situation 2: Goebel Company acquired a 30% interest in Dobbs Company on December 31, 2018 for $350,000. During 2019 Dobbs Company had net income of $150,000 and paid a cash dividend of $60,000. (Dobbs Company paid $60,000 cash dividend to all of its shareholders.) 14. Asom Assuming no other factors need to be considered, 30% interest acquired by Goebel enables them to exercise "significant influence over the Dobbs Company. Goebel should account for the investment a. by using the equity...
*USE T ACCOUNTS If Goebel Company acquired a 20% interest in Dobbs Company on December 31,...
*USE T ACCOUNTS If Goebel Company acquired a 20% interest in Dobbs Company on December 31, 2018 for $290,000 and during 2019 Dobbs Company had net income of $150,000 and paid a cash dividend of $60,000, applying the fair value method would give a debit balance in the Equity Investments (Dobbs) account at the end of 2019 of? If Goebel Company acquired a 30% interest in Dobbs Company on December 31, 2018 for $440,000 and during 2019 Dobbs Company had...
Flounder, Inc. had the following equity investment portfolio at January 1, 2017. 970 shares @ $15...
Flounder, Inc. had the following equity investment portfolio at January 1, 2017. 970 shares @ $15 each 860 shares @ $20 each 530 shares @ $9 each Evers Company Rogers Company Chance Company Equity investments cost Fair value adjustment Equity investments fair value $14,550 17,200 4,770 36,520 (7,280) $29,240 During 2017, the following transactions took place. 1. On March 1, Rogers Company paid a $2 per share dividend. 2. On April 30, Flounder, Inc. sold 320 shares of Chance Company...
Flounder, Inc. had the following equity investment portfolio at January 1, 2017 970 shares @ $15...
Flounder, Inc. had the following equity investment portfolio at January 1, 2017 970 shares @ $15 each 860 shares @ $20 each 530 shares @ $9 each $14,550 17,200 4,770 Evers Company Rogers Company Chance Company Equity investments cost Fair value adjustment Equity investments fair value 36,520 (7,280) $29,240 During 2017, the following transactions took place. 1. 2. 3. 4. On March 1, Rogers Company paid a $2 per share dividend. On April 30, Flounder, Inc. sold 320 shares of...
At December 31, 2018, Atlanta Company has an equity portfolio valued at $160,000. Its cost was...
At December 31, 2018, Atlanta Company has an equity portfolio valued at $160,000. Its cost was $132,000. If the Securities Fair Value Adjustment has a debit balance of $8,000, which of the following journal entries is required at December 31, 2018? Select one: a. Fair Value Adjustment 28,000 Unrealized Holding Gain or Loss-Income 28,000 b. Unrealized Holding Gain or Loss-Income 20,000 Fair Value Adjustment 20,000 c. Unrealized Holding Gain or Loss-Income 28,000 Fair Value Adjustment 28,000 d. Fair Value Adjustment...
19. Porter Company purchased 1,400 shares of the Krafty Group common stock for $53,200 (i.e., $38...
19. Porter Company purchased 1,400 shares of the Krafty Group common stock for $53,200 (i.e., $38 per share) at the beginning of the current year. There were 28,000 outstanding Krafty shares on the date of acquisition. Porter Company classifies its investment in Krafty as part of its available-for-sale portfolio. Total stockholders' equity of Krafty Company is $1,090,000 on the date of acquisition. Krafty reported $350,000 in net income and declared and paid $1.70 per share cash dividends at year-end. Read...
Use the following information to answer questions 1 and 2. Riley's Corporation was organized on January...
Use the following information to answer questions 1 and 2. Riley's Corporation was organized on January 1, 2019. The firm was authorized to issue 100,000 shares of $5 par value common stock. During 2019, Riley had the following transactions relating to stockholders’ equity: Issued 10,000 shares of common stock at $7 per share Issued 20,000 shares of common stock at $8 per share Reported a net income of $100,000 Declared and paid dividends of $50,000 Purchased 3,000 shares of treasury...
Monty Inc. acquired 20% of the outstanding common stock of Theresa Kulikowski Inc. on December 31,...
Monty Inc. acquired 20% of the outstanding common stock of Theresa Kulikowski Inc. on December 31, 2020. The purchase price was $1,310,000 for 52,400 shares. Kulikowski Inc. declared and paid an $0.85 per share cash dividend on June 30 and on December 31, 2021. Kulikowski reported net income of $701,000 for 2021. The fair value of Kulikowski's stock was $28 per share at December 31, 2021. Assume that the security is a trading security. Prepare the journal entries for Monty...
Situation 1: Goebel Company acquired a 20% interest in Dobbs Company on December 31, 2018 for $350,000. During 2019 Dobbs Company had net income of $150,000 and paid a cash dividend of $60,000. (Dobbs Company paid $60,000 cash dividend to all of its shareholders.) 12. Based on the information regarding Goebel's investment in Dobbs Company: Fair Value 12/31/18 12/31/19 $350,000 $365,000 Cost $350,000 Equity investment If the Fair Value Adjustment has a debit balance of $8,000, what amount of unrealized...
Situation 2: Goebel Company acquired a 30% interest in Dobbs Company on December 31, 2018 for $350,000. During 2019 Dobbs Company had net income of $150,000 and paid a cash dividend of $60,000. (Dobbs Company paid $60,000 cash dividend to all of its shareholders.) 18. The beginning balance in the investment account in Dobbs Company was $350,000, the balance at December 31, 2019 should be a. $332,000. b. $350,000. c. $377,000. d. $395,000 Goebel should report investment income for 2019...
Situation 2: Goebel Company acquired a 30% interest in Dobbs Company on December 31, 2018 for $350,000. During 2019 Dobbs Company had net income of $150,000 and paid a cash dividend of $60,000. (Dobbs Company paid $60,000 cash dividend to all of its shareholders.) 14. Asom Assuming no other factors need to be considered, 30% interest acquired by Goebel enables them to exercise "significant influence over the Dobbs Company. Goebel should account for the investment a. by using the equity...
Flounder, Inc. had the following equity investment portfolio at January 1, 2017. 970 shares @ $15 each 860 shares @ $20 each 530 shares @ $9 each Evers Company Rogers Company Chance Company Equity investments cost Fair value adjustment Equity investments fair value $14,550 17,200 4,770 36,520 (7,280) $29,240 During 2017, the following transactions took place. 1. On March 1, Rogers Company paid a $2 per share dividend. 2. On April 30, Flounder, Inc. sold 320 shares of Chance Company...
Flounder, Inc. had the following equity investment portfolio at January 1, 2017 970 shares @ $15 each 860 shares @ $20 each 530 shares @ $9 each $14,550 17,200 4,770 Evers Company Rogers Company Chance Company Equity investments cost Fair value adjustment Equity investments fair value 36,520 (7,280) $29,240 During 2017, the following transactions took place. 1. 2. 3. 4. On March 1, Rogers Company paid a $2 per share dividend. On April 30, Flounder, Inc. sold 320 shares of...
19. Porter Company purchased 1,400 shares of the Krafty Group common stock for $53,200 (i.e., $38 per share) at the beginning of the current year. There were 28,000 outstanding Krafty shares on the date of acquisition. Porter Company classifies its investment in Krafty as part of its available-for-sale portfolio. Total stockholders' equity of Krafty Company is $1,090,000 on the date of acquisition. Krafty reported $350,000 in net income and declared and paid $1.70 per share cash dividends at year-end. Read...
Monty Inc. acquired 20% of the outstanding common stock of Theresa Kulikowski Inc. on December 31, 2020. The purchase price was $1,310,000 for 52,400 shares. Kulikowski Inc. declared and paid an $0.85 per share cash dividend on June 30 and on December 31, 2021. Kulikowski reported net income of $701,000 for 2021. The fair value of Kulikowski's stock was $28 per share at December 31, 2021. Assume that the security is a trading security. Prepare the journal entries for Monty...
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