Exam 1: A: the Equity Method of Accounting for Investments

Which types of transactions, exchanges, or events would indicate that an investor has the ability to exercise significant influence over the operations of an investee?

On January 2, 2018, Heinreich Co.paid $500,000 for 25% of the voting common stock of Jones Corp.At the time of the investment, Jones had net assets with a book value and fair value of $1,800,000.During 2018, Jones incurred a net loss of $60,000 and paid dividends of $100,000.Any excess cost over book value is attributable to goodwill with an indefinite life. Required: 1) Prepare a schedule to show the amount of goodwill from Heinrich's investment in Jones. 2) Prepare a schedule to show the balance in Heinreich's investment account at December 31, 2018.

What is the amount of excess amortization expense for Jackie Corp's investment in Rob Co.for year 2018?

How much goodwill is associated with this investment?

When the fair value option is elected for application to an investment in which the investor has significant influence over the investee, how would the investor reflect the use of the fair value option in its balance sheet and in its income statement?

How would a change be made from the equity method to the fair value method of accounting for investments?

On January 2, 2017, Hull Corp.paid $516,000 for 24% (48,000 shares) of the outstanding common stock of Oliver Co.Hull used the equity method to account for the investment.At the end of 2017, the balance in the investment account was $620,000.On January 2, 2018, Hull sold 12,000 shares of Oliver stock for $12 per share.For 2018, Oliver reported net income of $118,000 and paid dividends of $30,000. Required: (A) Prepare the journal entry to record the sale of the 12,000 shares. (B) After the sale has been recorded, what is the balance in the investment account? (C) What percentage of Oliver Co.stock does Hull own after selling the 12,000 shares? (D) Because of the sale of stock, Hull can no longer exercise significant influence over the operations of Oliver.What effect will this have on Hull's accounting for the investment? (E) Prepare Hull's journal entries related to the investment for the rest of 2018.

Jager Inc.holds 30% of the outstanding voting shares of Kinson Co.and appropriately applies the equity method of accounting.Amortization associated with this investment equals $11,000 per year.For 2018, Kinson reported earnings of $100,000 and paid cash dividends of $40,000.During 2018, Kinson acquired inventory for $62,400, which was then sold to Jager for $96,000.At the end of 2018, Jager still held some of this inventory at its intra-entity selling price of $50,000. Required: Determine the amount of Equity in Investee Income that Jager should have reported for 2018.

What was the balance in the investment account before the shares were sold?

The balance in the Investment in Sacco account at December 31, 2018, is

On January 3, 2018, Jenkins Corp.acquired 40% of the outstanding common stock of Bolivar Co.for $1,200,000.This acquisition gave Jenkins the ability to exercise significant influence over the investee.The book value of the acquired shares was $950,000.Any excess cost over the underlying book value was assigned to a patent that was undervalued on Bolivar's balance sheet.This patent has a remaining useful life of ten years.For the year ended December 31, 2018, Bolivar reported net income of $312,000 and paid cash dividends of $96,000. Required: Prepare a schedule to show the balance Jenkins should report as its Investment in Bolivar Co.at December 31, 2018.

What is the balance in the Investment in Stanley Corporation on December 31, 2018?

What is the amount of excess amortization expense for Bailey's investment in Emery for the first year?

What was the reported balance of Harley's Investment in Bike Co.at December 31, 2017?

How much income did Harley report from Bike for 2017?

For each of the following numbered situations below, select the best letter answer concerning accounting for investments: (A) Increase the investment account. (B) Decrease the investment account. (C) Increase dividend revenue. (D) No adjustment necessary. (1.) Income reported by 40% owned investee. (2.) Income reported by 10% owned investee. (3.) Loss reported by 40% owned investee. (4.) Loss reported by 10% investee. (5.) Change from fair-value method to equity method.Prior income exceeded dividends. (6.) Change from fair-value method to equity method.Prior income was less than dividends. (7.) Change from equity method to fair-value method.Prior income exceeded dividends. (8.) Change from equity method to fair-value method.Prior income was less than dividends. (9.) Dividends received from 40% investee. (10.) Dividends received from 10% investee. (11.) Purchase of additional shares of investee. (12.) Investor's share of gross profit from intra-entity inventory sales when using the equity method.

How should an investor account for, and report, an investee's other comprehensive income (or loss)?

The equity in income of Sacco for 2018, is

What was the balance in the Investment in Nicole Corp.account at December 31, 2018?

What amount of equity income would Anderson recognize in 2018 from its ownership interest in Barney?