Question 1

During 2019,the following items were reported on ShoeCo's statement of cash flows in millions of dollars.
For each item,identify the type of activity it is (operating,investing,financing)and the effect it would have on the statement of cash flows.The operating activities section is prepared using the indirect method.Enter "+" if the item is added or "-" if the item is subtracted.Do not enter dollar amounts.

Accepted Answer

The answer of During 2019,the following items were reported on...

Question 2

Orleans Corporation purchased 1,000,000 shares of Creole Corporation's common stock,which constitutes 10% of Creole's voting stock on June 30,2019 for $42 per share.Orleans' intent is to keep these shares beyond the current year.On December 20,2019,Creole paid a $4,000,000 cash dividend.On December 31,2019,Creole's stock was trading at $45 per share and their reported 2019 net income was $52 million.
A.Record the transaction to record the acquisition of Creole Corporation on June 30,2019.
B.Record the transaction for the dividend received by Orleans on December 20,2019.
C.Record any year-end entries needed by Orleans Corporation.

Accepted Answer

The answer of Orleans Corporation purchased 1,000,000 shares of Creole...

Question 3

On January 1,2019,Alden Company acquired 15,000 shares (4%)of the nonvoting preferred stock of Maxim Corporation as a long-term investment for $225,000.Maxim reported a 2019 net income of $35,000.On January 2,2020,Maxim declared and paid a $10,000 cash dividend on the preferred stock.The fair value of the Maxim stock held by Alden on December 31,2019,was $224,000.Alden Company has recorded only the following journal entries:
January 1,2019:
  December 31,2019 (end of the accounting period):
No entry
January 2,2020:
  Based on the above information,answer the following questions:

Accepted Answer

The answer of On January 1,2019,Alden Company acquired 15,000 shares...

Question 4

As a long-term investment,Martha Company purchased 5,000 of the 12,500 outstanding voting shares of Stewart Corporation at $20 per share on January 1,2019.At the end of 2019,Stewart reported net income of $100,000 and declared and paid dividends of $10,000.The market price of the Stewart stock at the end of 2019 was $23 per share.
Calculate the net balance in Martha's investment account at the end of 2019.

Accepted Answer

The answer of As a long-term investment,Martha Company purchased 5,000...

Question 5

Describe the difference in accounting for debt investments classified as available-for-sale versus the accounting for equity securities.

Accepted Answer

The answer of Describe the difference in accounting for debt...

Question 6

On January 2,2019,Eagle Company acquired 100% of Solly Company's common stock for $900,000 cash in a merger transaction.At this date,the book value of all of Solly Company's assets,except a building,was $700,000.The fair value of these assets without the building was $800,000.In addition to these assets is a building that has a book value of $400,000 and a fair value of $440,000.The book value and fair value of Solly Company's liabilities is $520,000.
A.Prepare a schedule to calculate the goodwill arising from the transaction.
B.Prepare the journal entry to record the merger on the books of Eagle Company at the acquisition date.

Accepted Answer

The answer of On January 2,2019,Eagle Company acquired 100% of...

Question 7

Donald Corporation purchased 3,000 shares of the outstanding common voting stock of Apprentice Corporation on January 2,2019,for $80 per share.At the date of purchase Apprentice Corporation had outstanding 10,000 shares of common stock with a par value of $50 per share.During 2019,Apprentice reported net income of $60,000 and declared and paid a $5,000 cash dividend.The December 31,2019,fair value of Apprentice's stock was $84.
Prepare the journal entries required for Donald Corporation on January 2,2019 and December 31,2019.

Accepted Answer

The answer of Donald Corporation purchased 3,000 shares of the...

Question 8

On December 31,2019,Jean World Corporation recorded the following journal entry relating to its investment in 9,000 shares of common stock of Soda Corporation.
  At the end of 2019,Soda Corporation reported net income of $120,000.
Earlier in the year,Soda declared and paid dividends of $18,000.
A.What method is being used to account for this investment?
B.What is the total number of shares outstanding of Soda's common stock?

Accepted Answer

The answer of On December 31,2019,Jean World Corporation recorded the...

Question 9

A.Discuss the criteria for applying the equity method of accounting for long-term investments.
B.Discuss the rationale for the equity method procedures of accounting for long-term investments.

Accepted Answer

The answer of A.Discuss the criteria for applying the equity...

Question 10

During 2019,the following items were reported on The Mickey Company's statement of cash flows in millions of dollars.
For each item,identify the type of activity it is (operating,investing,financing)and the effect it would have on the statement of cash flows.The operating activities section is prepared using the indirect method.Enter "+" if the item is added or "-" if the item is subtracted.Do not enter dollar amounts.

Accepted Answer

The answer of During 2019,the following items were reported on...

Question 11

On March 31,2019,Kudos Corporation paid $20,000,000 for 2,000,000,$1 par value,shares of the voting stock of Nutribar Corporation.This investment represented 40% of Nutribar's outstanding shares.On December 12,2019,Nutribar declared and paid a $1,000,000 cash dividend and reported net income for the year ended 2019 of $10,000,000.On December 31,2019,Nutribar's stock was trading at $11.50 per share.
A.Record the journal entry on Kudos' book for the acquisition of Nutribar on March 31,2019.
B.Record the cash dividend received by Kudos on December 12,2019.
C.Record any end of year entries needed on Kudos' books.

Accepted Answer

The answer of On March 31,2019,Kudos Corporation paid $20,000,000 for...

Question 12

On January 1,2019,Fall Corporation acquired 100% of the outstanding voting shares of Foliage Corporation for $600,000.The book and fair values of Foliage's assets and liabilities as of January 1,2019 are listed below:
  What amount of goodwill,if any,will be recorded by Fall Corporation as a result of this investment?

Accepted Answer

The answer of On January 1,2019,Fall Corporation acquired 100% of...

Question 13

Discuss how the equity method of accounting for investments prevents managers of the investor corporation from manipulating income related to dividends from the investee.

Accepted Answer

The answer of Discuss how the equity method of accounting...

Quiz 14: Reporting and Interpreting Investments in Other Corporations

Describe the difference in accounting for debt investments classified as available-for-sale versus the accounting for equity securities.

A.Discuss the criteria for applying the equity method of accounting for long-term investments. B.Discuss the rationale for the equity method procedures of accounting for long-term investments.

Discuss how the equity method of accounting for investments prevents managers of the investor corporation from manipulating income related to dividends from the investee.