Chapter 10: Q11RQ. (page 567)
Where on the financial statements is an unrealized holding gain or loss on available-for-sale debt investments reported?
Unrealized holdings gains or losses from available for sale debt are reported in the other comprehensive income.
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Lee Co. reported the following items on its 2018 financial statements:
Total Assets, December 31, 2018 | $10,000 |
Total Assets, December 31, 2017 | 15,000 |
For year ended December 31, 2018 | |
Interest Expenses | 150 |
Net income | 850 |
Determine Lee’s rate of return on total assets for 2018.
Question: P10-23B Accounting for equity investments
The beginning balance sheet of Text Source Co. included a \(700,000 investment in Taylor stock (20% ownership).
During the year, Text Source completed the following investment transactions:
Mar. 3 Purchased 5,000 shares at \)13 per share of Josh Software common stock as a long-term equity investment, representing 3% ownership, no significant influence.
May 15 Received a cash dividend of \(0.69 per share on the Josh investment.
Dec. 15 Received a cash dividend of \)100,000 from Taylor investment.
31 Received Taylor’s annual report showing \(100,000 of net income.
31 Received Josh’s annual report showing \)620,000 of net income for the year.
31 Taylor’s stock fair value at year-end was \(620,000.
31 Josh’s common stock fair value at year-end was \)14 per share.
Requirements
Where is the unrealized holding gain or loss associated with the Josh stock reported?
Classifying and accounting for equity investments
Boston Today Publishers completed the following investment transactions during 2018 and 2019:
2018
Dec. 6 Purchased 2,500 shares of Loveable stock at a price of \(24.00 per share, intending to sell the investment next month. Boston did not have significant influence over Loveable.
23. Received a cash dividend of \)1.50 per share on the Loveable stock.
31. Adjusted the investment to its market value of \(11.00 per share.
2019
Jan. 27 Sold the Loveable stock for \)18.20 per share.
Requirements
1. Journalize Boston Today’s investment transactions. Explanations are not required.
On January 1, 2018, the College Corporation decides to invest in Small Town bonds. The bonds mature on December 31, 2022, and pay interest of 4% on June 30 and December 31. The market rate of interest was 4% on January 1, 2018, so the $20,000 maturity-value bonds sold for face value. College Corporation intends to hold the bonds until maturity. Journalize the transactions related to College Corporation’s investment in Small Town bonds during 2018.
Question: S10-4 Accounting for equity investments
On January 1, 2018, Bryant, Inc. decides to invest in 3,750 shares of Farrier stock when the stock is selling for \(16 per share. On August 1, 2018, Farrier paid a \)0.70 per share cash dividend to stockholders. On December 31, 2018, Farrier reports net income of $50,000 for 2018. Assume Farrier has 15,000 shares of voting stock outstanding during 2018 and Bryant has significant influence over Farrier.
Requirements
3. In what category and value would Bryant report the investment on the December 31, 2018, balance sheet?
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