All of the following statements regarding accounting for stock investments with insignificant influence under U.S. GAAP...
All of the following statements regarding accounting for stock investments with insignificant influence under U.S. GAAP are true except:
Multiple Choice
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When an investor owns less than 20% of voting stock, the investor is presumed to have insignificant influence.
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Stock investments with insignificant influence are reported at fair value.
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The investment account equals the acquisition cost plus the share of investee income plus the share of investee dividends.
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Stock investments with insignificant influence are classified as either short or long term based on managers’ intent and the stock’s marketability.
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Any unrealized gain (or loss) from a change in the fair value of stock investments is reported on the income statement.
Homework Answers
All of the following statements regarding accounting for stock investments with insignificant influence under U.S. GAAP are true except:
Stock investments with insignificant influence are classified as either short or long term based on managers’ intent and the stock’s marketability.
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All of the following statements regarding accounting for stock
investments with insignificant influence under U.S. GAAP...
On December 31, Mars Co. had the following portfolio of stock investments with insignificant influence. Mars...
On December 31, Mars Co. had the following portfolio of stock investments with insignificant influence. Mars had no stock investments in prior periods. Portfolio of Stock Investments Cost Fair Value Apple stock $ 8,400 $ 11,200 Chipotle stock 7,200 4,700 Under Armour stock 12,800 14,900 1. After the fair value adjustment is made, prepare the assets section of Mars Co.’s December 31 classified balance sheet. Assume Mars plans to sell its trading securities within the next six months. 2. In...
On December 31, Mars Co. had the following portfolio of stock investments with insignificant influence. Mars...
On December 31, Mars Co. had the following portfolio of stock investments with insignificant influence. Mars had no stock investments in prior periods. Portfolio of Stock Investments Apple stock Chipotle stock Under Armour stock Cost $ 6,600 4,800 12,200 Fair Value $ 8,800 2,300 14,200 1. After the fair value adjustment is made, prepare the assets section of Mars Co.'s December 31 classified balance sheet. Assume Mars plans to sell its trading securities within the next six months. 2. In...
Six months ago, a company purchased stock investments with insignificant influence for $70,000. This is the...
Six months ago, a company purchased stock investments with insignificant influence for $70,000. This is the company’s first and only purchase of stock. The current year-end fair value of the stock is $74,000. The company should record a: Multiple Choice Debit to Unrealized Loss-Income for $4,000. Credit to Investment Revenue for $4,000. Debit to Investment Revenue for $4,000. Debit to Unrealized Gain-Equity for $4,000. Credit to Dividend Revenue for $4,000.
Which of the following observations is NOT consistent with the accounting for investments in equity securities...
Which of the following observations is NOT consistent with the accounting for investments in equity securities where there is no significant influence? a) When the securities are remeasured to fair value as of the end of each period, any resulting difference is an unrealized gain or loss to be recognized in income b) Changes in the number of investment shares resulting from stock dividends, stock splits, or reverse splits must be formally recorded by the investor c) The investor recognizes...
Problem 15-4A Recording, adjusting, and reporting stock investments with insignificant influence P41 Rose Company had no...
Problem 15-4A Recording, adjusting, and reporting stock investments with insignificant influence P41 Rose Company had no short-term investments prior to this year. It had the following transactions this year involving short- term stock investments with insignificant influence. Apr. July Aug. 16 Purchased 3,500 shares of Gem Co. stock at $24 per share. 7 Purchased 2,000 shares of PepsiCo stock at $49 per share. 20 Purchased 1,000 shares of Xerox stock at $16 per share. 15 Received a $1.00 per share...
Investor company owns 35% of investee company voting stock and accounts for the investment under the...
Investor company owns 35% of investee company voting stock and accounts for the investment under the equity method. investors share of investees current net loss exceeds the balance in the investment account. investor should in most cases A. Lower of cost or market, with unrealized gains and losses include in earnings. B. Fair value, with unrealized gains included in earnings only to the extent of previously recognized unrealized losses unless accounting alternative is elected.. C. Fair value, with unrealized gains...
Exercise 15-10 Transactions and fair value adjustments for stock investments with insignificant influence LO P4 Carlsville...
Exercise 15-10 Transactions and fair value adjustments for stock investments with insignificant influence LO P4 Carlsville Company began operations in the current year and had no prior stock investments. The following transactions are from its short-term stock investments with insignificant influence. Prepare journal entries to record these transactions. On December 31, prepare the adjusting entry to record the fair value adjustment for the portfolio of stock investments. 2:36:07 ook July 22 Purchased 1,400 shares of Hunt Corp. at $26 per...
Carlsville Company began operations in the current year and had no prior stock investments. The following...
Carlsville Company began operations in the current year and had no prior stock investments. The following transactions are from its short-term stock investments with insignificant influence. Prepare journal entries to record these transactions. On December 31, prepare the adjusting entry to record the fair value adjustment for the portfolio of stock investments. July 22 Purchased 1,700 shares of Hunt Corp. at $25 per share. Sept. 5 Received a $2 cash dividend for each share of Hunt Corp. Sept. 27 Purchased...
16-6. Debt Investment, Equity Investments, K&Z Potato Chip Company, a U.S. GAAP reporter, with the following...
16-6. Debt Investment, Equity Investments, K&Z Potato Chip Company, a U.S. GAAP reporter, with the following information regarding its investments in equity securities during the current Date January 1 (Beginning Balance: No entry required) January 23 February 4 Description K&Z is currently holding 8,500 of Faithful Corporation common shares (publicly traded). The Faithful shares cost $20 per share. There is a debit balance of $17,000 in the fair value adjustment account. K&Z does not have a significant influence over the...
Stock Inv Stock Investments Loss on Sale of Stock Investments Cash.. . d. 25% of the...
Stock Inv Stock Investments Loss on Sale of Stock Investments Cash.. . d. 25% of the common stock of an investee company is purchased as a long-term investment, the appropriate method of accounting for the investment is a. the cost method. b. the equity method. C. the preparation of consolidated financial statements. d. determined by agreement with whomever owns the remaining 90% of the stock, 6) On January 1, 2020, Jamestina Corp. paid $1,800,000 for 100,000 shares of Belinda Company's...
On December 31, Mars Co. had the following portfolio of stock investments with insignificant influence. Mars had no stock investments in prior periods. Portfolio of Stock Investments Apple stock Chipotle stock Under Armour stock Cost $ 6,600 4,800 12,200 Fair Value $ 8,800 2,300 14,200 1. After the fair value adjustment is made, prepare the assets section of Mars Co.'s December 31 classified balance sheet. Assume Mars plans to sell its trading securities within the next six months. 2. In...
Problem 15-4A Recording, adjusting, and reporting stock investments with insignificant influence P41 Rose Company had no short-term investments prior to this year. It had the following transactions this year involving short- term stock investments with insignificant influence. Apr. July Aug. 16 Purchased 3,500 shares of Gem Co. stock at $24 per share. 7 Purchased 2,000 shares of PepsiCo stock at $49 per share. 20 Purchased 1,000 shares of Xerox stock at $16 per share. 15 Received a $1.00 per share...
Exercise 15-10 Transactions and fair value adjustments for stock investments with insignificant influence LO P4 Carlsville Company began operations in the current year and had no prior stock investments. The following transactions are from its short-term stock investments with insignificant influence. Prepare journal entries to record these transactions. On December 31, prepare the adjusting entry to record the fair value adjustment for the portfolio of stock investments. 2:36:07 ook July 22 Purchased 1,400 shares of Hunt Corp. at $26 per...
16-6. Debt Investment, Equity Investments, K&Z Potato Chip Company, a U.S. GAAP reporter, with the following information regarding its investments in equity securities during the current Date January 1 (Beginning Balance: No entry required) January 23 February 4 Description K&Z is currently holding 8,500 of Faithful Corporation common shares (publicly traded). The Faithful shares cost $20 per share. There is a debit balance of $17,000 in the fair value adjustment account. K&Z does not have a significant influence over the...
Stock Inv Stock Investments Loss on Sale of Stock Investments Cash.. . d. 25% of the common stock of an investee company is purchased as a long-term investment, the appropriate method of accounting for the investment is a. the cost method. b. the equity method. C. the preparation of consolidated financial statements. d. determined by agreement with whomever owns the remaining 90% of the stock, 6) On January 1, 2020, Jamestina Corp. paid $1,800,000 for 100,000 shares of Belinda Company's...
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