Question

Using the information from Exhibit 1.1 (p.8 Chapter 1) below answer questions 1 - 4 below:...

Using the information from Exhibit 1.1 (p.8 Chapter 1) below answer questions 1 - 4 below:

EXHIBIT 1.1 Comparison of Fair Value Method (ASC 320) and Equity Method (ASC 323)

FAIR VALUE EQUITY METHOD
Influence Not Significant Influence Significant
Little Company Big Company Big Company
Carrying Fair Equity in Carrying
Dividend Value Value Investee Value
Year Income Dividends Income Investment Adjustment Income Investment
2014 $200,000 $50,000 $10,000 $235,000 $35,000 $40,000 $230,000
2015 300,000 100,000 20,000 255,000 55,000 60,000 270,000
2016 400,000 200,000 40,000 320,000 120,000 80,000 310,000
Total income recognized $70,000 $180,000

. Prepare the journal entries Big Company would record in fiscal year 2015 if it was using the Fair Value Method to account for

     its investment in Little Company in the space provided below.

Prepare the journal entries Big Company would record in fiscal year 2015 if it was using the Equity Method to account for

      its investment in Little Company in the space provided below.
Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
The Big company spent $1,000,000 to obtain a 25% stake in Little. At that date, the...
The Big company spent $1,000,000 to obtain a 25% stake in Little. At that date, the net book value of Little’s assets and liabilities was $3,900,000. Little also had machines with remaining lives of 4 years, which had a fair value in total $100,000 higher than their book values. Big accounts for its investment under the equity method. Which of the following is correct? Each year, Big will record its 25% share of Little’s income, and will make no special...
True and False: GAAP allows companies that would normally use the equity method the option of...
True and False: GAAP allows companies that would normally use the equity method the option of using the fair value method, assuming the value of the stock is readily determinable. FRS allows companies that would normally use the equity method the option of using the fair value method, assuming the value of the stock is readily determinable. the concepts of significant influence and control under GAAP are very similar to the concepts used in IFRS. Journal entry 4.Big company receives...
Required information [The following information applies to the questions displayed below.] As a long-term investment, Painters'...
Required information [The following information applies to the questions displayed below.] As a long-term investment, Painters' Equipment Company purchased 20% of AMC Supplies Inc.'s 430,000 shares for $510,000 at the beginning of the fiscal year of both companies. On the purchase date, the fair value and book value of AMC’s net assets were equal. During the year, AMC earned net income of $280,000 and distributed cash dividends of 15 cents per share. At year-end, the fair value of the shares...
Required information [The following information applies to the questions displayed below.] As a long-term investment, Painters'...
Required information [The following information applies to the questions displayed below.] As a long-term investment, Painters' Equipment Company purchased 20% of AMC Supplies Inc.'s 430,000 shares for $510,000 at the beginning of the fiscal year of both companies. On the purchase date, the fair value and book value of AMC’s net assets were equal. During the year, AMC earned net income of $280,000 and distributed cash dividends of 15 cents per share. At year-end, the fair value of the shares...
Austin, Inc., acquired 10 percent of McKenzie Corporation on January 1, 2014 for $313,400. During 2014,...
Austin, Inc., acquired 10 percent of McKenzie Corporation on January 1, 2014 for $313,400. During 2014, McKenzie earned a net income of $287,000 while declaring and paying cash dividends of $108,000. On January 1, 2015, Austin purchased an additional 30 percent of McKenzie for $932,700. The initial 10 percent investment had been maintained at fair value, and the fair value of McKenzie on January 1, 2015 is implied by the second purchase. The equity method will now be applied. During...
Austin, Inc., acquired 10 percent of McKenzie Corporation on January 1, 2014 for $313,400. During 2014,...
Austin, Inc., acquired 10 percent of McKenzie Corporation on January 1, 2014 for $313,400. During 2014, McKenzie earned a net income of $287,000 while declaring and paying cash dividends of $108,000. On January 1, 2015, Austin purchased an additional 30 percent of McKenzie for $932,700. The initial 10 percent investment had been maintained at fair value, and the fair value of McKenzie on January 1, 2015 is implied by the second purchase. The equity method will now be applied. During...
Exercise 12-27 (Algo) Fair value option; equity method investments [LO12-6, 12-8] As a long-term investment at...
Exercise 12-27 (Algo) Fair value option; equity method investments [LO12-6, 12-8] As a long-term investment at the beginning of the 2021 fiscal year, Florists International purchased 20% of Nursery Supplies Inc.’s 4 million shares of capital stock for $60 million. The fair value and book value of the shares were the same at that time. The company realizes that this investment typically would be accounted for under the equity method, but instead chooses to measure the investment at fair value....
Austin, Inc., acquired 10 percent of McKenzie Corporation on January 1, 2014 for $313,400. During 2014,...
Austin, Inc., acquired 10 percent of McKenzie Corporation on January 1, 2014 for $313,400. During 2014, McKenzie earned a net income of $287,000 while declaring and paying cash dividends of $108,000. On January 1, 2015, Austin purchased an additional 30 percent of McKenzie for $932,700. The initial 10 percent investment had been maintained at fair value, and the fair value of McKenzie on January 1, 2015 is implied by the second purchase. The equity method will now be applied. During...
On January 1, 2015, BeWell Company purchased 10% of common stock of DoingWell Co for $450,000...
On January 1, 2015, BeWell Company purchased 10% of common stock of DoingWell Co for $450,000 and classified it as Available for Sale securities. BeWell does not have significant influence on Doingwell Company. DoingWell reported net income of $27,000 for the year and paid dividends of $9,000. On Dec 31, 2015 the Fair Value of this investment was $420,000 Required: Prepare the appropriate journal entries on Jan 1, 2015 and December 31, 2015 to record the above transactions including year...
Austin, Inc., acquired 10 percent of McKenzie Corporation on January 1, 2014 for $313,400. During 2014,...
Austin, Inc., acquired 10 percent of McKenzie Corporation on January 1, 2014 for $313,400. During 2014, McKenzie earned a net income of $287,000 while declaring and paying cash dividends of $108,000. On January 1, 2015, Austin purchased an additional 30 percent of McKenzie for $932,700. The initial 10 percent investment had been maintained at fair value, and the fair value of McKenzie on January 1, 2015 is implied by the second purchase. The equity method will now be applied. During...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT