Homework Answers
| If a company has acquired a 20% to 50% interest in another corporation, this generally results in a significant level of influence |
| The investee under such investment is called as associate or affiliate and such investments should be accounted for using Equity method |
| The investor has significant influence over decisions of investee corporation however it does not exercise control over investee corporation. |
| Option C is correct |
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16. If a company has acquired a 20% to 50% interest in another corporation, this generally...
The Wise Company acquired a 20% interest in the outstanding common stock of the Smith Company....
The Wise Company acquired a 20% interest in the outstanding common stock of the Smith Company. The Wise Company can exercise significant influence over the operating and financial policies of the Smith Company. The Wise Company should account for its investment in the Smith Company by using the Select one: O a securities held-to-maturity method b. equity method c. lower of cost or market method d. cost method
Equity securities in which the investor owns less than 20% ownership in the voting stock of...
Equity securities in which the investor owns less than 20% ownership in the voting stock of the investee generally can be classified as equity investments. A. held-to-maturity B. no significant influence C. controlling interest D. significant influence
Do Journal entry for acquiring a bond: Kuhl Corporation acquires 50 Doan Inc, 8%, 10 year...
Do Journal entry for acquiring a bond: Kuhl Corporation acquires 50 Doan Inc, 8%, 10 year $1000 bonds on 1/1/2017 for $50,000 What is the journal entry: Recording the bond interest: Do The bonds pay interest of $4000 annually on January 1 ($50,000 x 8%). If Kuhl Corp's fiscal year ends on December 31, what is the adjusting entry? What is the journal entry to record the receipt of the interest? Sale of the bond: Kuhl Corporation receives net proceeds...
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...
Question 6 If the cost method is used to account for a long-term investment in common...
Question 6 If the cost method is used to account for a long-term investment in common stock, dividends received should be credited to the Dividend Revenue account. debited to the Stock Investments account. recorded only when 20% or more of the stock is owned. credited to the Stock Investments account. Question 7 If 10% of the common stock of an investee company is purchased as a long-term investment, the appropriate method of accounting for the investment is determined by agreement...
Multiple Choice Questions 1. Gaw Company owns 15% of the common stock of Trace Corporation and...
Multiple Choice Questions 1. Gaw Company owns 15% of the common stock of Trace Corporation and used the fair-value method to account for this investment. Trace reported net income of $110,000 for 2008 and paid dividends of $60,000 on October 1, 2008. How much income should Gaw recognize on this investment in 2008? A. $16,500 Noinfluence B.$9,000 C. $25,500 (If company makes a loss or Profit doesn't D. $7,500 E. $50,000 60,000 X 15.. 2. Yaro Company owns 30% of...
Equity Method for Stock Investment At a total cost of $1,800,000, Herrera Corporation acquired 120,000 shares...
Equity Method for Stock Investment At a total cost of $1,800,000, Herrera Corporation acquired 120,000 shares of Tran Corp. common stock as a long-term investment. Herrera Corporation uses the equity method of accounting for this investment. Tran Corp. has 300,000 shares of common stock outstanding, including the shares acquired by Herrera Corporation. a. Journalize the entries by Herrera Corporation to record the following information: 1. Tran Corp. reports net income of $3,240,000 for the current period. Investment in Tran Corp....
On January 1, 2018, Pen Corporation acquired 75% of the outstanding common stock of Sen Company...
On January 1, 2018, Pen Corporation acquired 75% of the outstanding common stock of Sen Company for $450,000. Fair value of noncontrolling interest at the date of acquisition is $116,500. Sen’s stockholders’ equity on January 1, 2018, was as follows: Common stock, $20 par $200,000 Additional paid-in capital 100,000 Retained earnings 100,000 Accumulated OCI 25,000 Differences between book value and fair value of the identifiable net assets of Sen Company on January 1, 2018, were...
15. A U.S. company acquires 65% of another company. The acquisition includes the following items: 10,000...
15. A U.S. company acquires 65% of another company. The acquisition includes the following items: 10,000 shares of new stock issued to the former shareholders of the acquired company, fair value $40/share $5/share in cash paid to the former shareholders of the acquired company, 25,000 shares acquired Registration fees for the stock, $2,000, paid in cash Legal and consulting fees, $3,000, paid in cash $5,000 in severance pay to former employees of the acquired company Vested stock options issued to...
6. Jack Corporation purchased a 20% interest in Jill Corporation for $1,500,000 on January 1, 2018....
6. Jack Corporation purchased a 20% interest in Jill Corporation for $1,500,000 on January 1, 2018. Jack can significantly influence Jill. On December 10, 2018, Jill declared and paid SI million in dividends. Jill reported a net loss of $6 million for the year. What amount of loss should Jack report in its income statement for 2018 relative to its investment in Jill? A) $1,000,000 B) $1,200,000. C) $1,400,000. D) $1,500,000
The Wise Company acquired a 20% interest in the outstanding common stock of the Smith Company. The Wise Company can exercise significant influence over the operating and financial policies of the Smith Company. The Wise Company should account for its investment in the Smith Company by using the Select one: O a securities held-to-maturity method b. equity method c. lower of cost or market method d. cost method
Equity securities in which the investor owns less than 20% ownership in the voting stock of the investee generally can be classified as equity investments. A. held-to-maturity B. no significant influence C. controlling interest D. significant influence
Do Journal entry for acquiring a bond: Kuhl Corporation acquires 50 Doan Inc, 8%, 10 year $1000 bonds on 1/1/2017 for $50,000 What is the journal entry: Recording the bond interest: Do The bonds pay interest of $4000 annually on January 1 ($50,000 x 8%). If Kuhl Corp's fiscal year ends on December 31, what is the adjusting entry? What is the journal entry to record the receipt of the interest? Sale of the bond: Kuhl Corporation receives net proceeds...
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...
Multiple Choice Questions 1. Gaw Company owns 15% of the common stock of Trace Corporation and used the fair-value method to account for this investment. Trace reported net income of $110,000 for 2008 and paid dividends of $60,000 on October 1, 2008. How much income should Gaw recognize on this investment in 2008? A. $16,500 Noinfluence B.$9,000 C. $25,500 (If company makes a loss or Profit doesn't D. $7,500 E. $50,000 60,000 X 15.. 2. Yaro Company owns 30% of...
15. A U.S. company acquires 65% of another company. The acquisition includes the following items: 10,000 shares of new stock issued to the former shareholders of the acquired company, fair value $40/share $5/share in cash paid to the former shareholders of the acquired company, 25,000 shares acquired Registration fees for the stock, $2,000, paid in cash Legal and consulting fees, $3,000, paid in cash $5,000 in severance pay to former employees of the acquired company Vested stock options issued to...
6. Jack Corporation purchased a 20% interest in Jill Corporation for $1,500,000 on January 1, 2018. Jack can significantly influence Jill. On December 10, 2018, Jill declared and paid SI million in dividends. Jill reported a net loss of $6 million for the year. What amount of loss should Jack report in its income statement for 2018 relative to its investment in Jill? A) $1,000,000 B) $1,200,000. C) $1,400,000. D) $1,500,000
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