Chapter 13: Q1IFRS (page 658)
Where can authoritative IFRS be found related to investments?
It is found in IFRS 9.
Over 30 million students worldwide already upgrade their learning with Vaia!
All the tools & learning materials you need for study success - in one app.
Get started for free
Discuss the accounting treatment or disclosure that should be accorded a declared but unpaid cash dividend, an accumulated but undeclared dividend on cumulative preferred stock, and a stock dividend distributable.
(Equity Method) On January 1, 2017, Pennington Corporation purchased 30% of the common shares of Edwards
Company for \(180,000. During the year, Edwards earned a net income of \)80,000 and paid dividends of $20,000.
Instructions
Prepare the entries for Pennington to record the purchase and any additional entries related to this investment in Edwards Company
in 2017.
(Equity Investment) Oregon Co. had purchased 200 shares of Washington Co. for \(40 each this year (Oregon
Co. does not have significant influence). Oregon Co. sold 100 shares of Washington Co. stock for \)45 each. At year-end, the price
per share of the Washington Co. the stock had dropped to $35.
Instructions
Prepare the journal entries for these transactions and any year-end adjustments.
(Fair Value Measurement Issues) Assume the same information as in E17-19 for Lilly Company. In addition,
assume that the investment in the Woods Inc. stock was sold during 2018 for \(195,000. On December 31, 2018, the following
information relates to its two remaining investments of common stock.
Cost Fair Value
(at purchase date) (at December 31)
Investment in Arroyo Company stock \)100,000 \(140,000
Investment in Lee Corporation stock 250,000 310,000
Total \)350,000 \(450,000
Net income before any security gains and losses for 2018 was \)905,000.
Instructions
(a) Compute the amount of net income or net loss that Lilly should report for 2018, taking into consideration Lilly’s securitytransactions for 2018.
(b) Prepare the journal entry to record unrealized gain or loss related to the investment in Arroyo Company stock atDecember 31, 2018.
(Equity Securities Entries) McElroy Company has the following portfolio of investment securities at September
30, 2017, its most recent reporting date.
Investment Securities Cost Fair Value
Horton, Inc. common (5,000 shares) \(215,000 \)200,000
Monty, Inc. preferred (3,500 shares) 133,000 140,000
Oakwood Corp. common (1,000 shares) 180,000 179,000
On October 10, 2017, the Horton shares were sold at a price of \(54 per share. In addition, 3,000 shares of Patriot common stock
were acquired at \)54.50 per share on November 2, 2017. December 31, 2017, fair values were Monty \(106,000, Patriot
\)132,000, and Oakwood $193,000.
Instructions
Prepare the journal entries to record the sale, purchase, and adjusting entries related to the equity securities in the last quarter of 2017
What do you think about this solution?
We value your feedback to improve our textbook solutions.
