Advanced Accounting
12th Edition
ISBN: 9781305084858
Author: Paul M. Fischer, William J. Tayler, Rita H. Cheng
Publisher: Cengage Learning
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Chapter 5, Problem 5.5P
To determine
Concept Introduction:
Intercompany adjustments in consolidation- Inter-company receivables and payables are eliminated and subsidiary’s capital is also eliminated.
To prepare The necessary worksheet for consolidation of given accounts
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Pine Company makes an investment in Holt Company. Journalize the following transactions assuming that Pine Company uses (a) the fair value method and (b) the equity method for its investment in Holt Company:
1) On Jan. 1, 2017, Pine bought 30% of Holt’s common stock. Total book value of all Holt’s common stock was $800,000 on this date.
2) During 2017, Holt reported $40,000 of net income.
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Watney Inc. purchased $10,000 of 6% Hamel bonds at par on July 1, 2016. The bonds pay interest semiannually, and pay only interest and principal. Watney intends to hold the Hamel bonds for purposes of collecting the cash flows provided by interest and principal. During the second half of 2016, an increase in interest rates reduced the fair value of the bonds to $9,000. Watney reports investments under IFRS No. 9. Required: 1. Prepare the December 31, 2016, journal entry to record Watney’s interest revenue. 2. Prepare the December 31, 2016, journal entry (if any is required) to record unrealized gains or losses on the Hamel bonds during 2016. (Do not consider whether an impairment should be recorded.)
Tanner-UNF Corporation acquired as a long-term investment $240 million of 6% bonds, dated July 1, on July 1, 2016. Company management has the positive intent and ability to hold the bonds until maturity. The market interest rate (yield) was 8% for bonds of similar risk and maturity. Tanner-UNF paid $200 million for the bonds. The company will receive interest semiannually on June 30 and December 31. As a result of changing market conditions, the fair value of the bonds at December 31, 2016 was $210 million. Required: 1. Prepare the journal entry to record Tanner-UNF’s investment in the bonds on July 1, 2016. 2. Prepare the journal entry by Tanner-UNF to record interest on December 31, 2016, at the effective (market) rate. 3. At what amount will Tanner-UNF report its investment in the December 31, 2016, balance sheet? Why? 4. Suppose Moody’s bond rating agency downgraded the risk rating of the bonds motivating Tanner-UNF to sell the investment on January 2, 2017, for $190 million.…
Chapter 5 Solutions
Advanced Accounting
Ch. 5 - Prob. 1UTICh. 5 - Subsidiary Company S has $1000,000 of bonds...Ch. 5 - Plessor Industries acquired 80% of the outstanding...Ch. 5 - Company P purchased $100,000 of subsidiary Company...Ch. 5 - Prob. 5UTICh. 5 - Prob. 6UTICh. 5 - Prob. 7UTICh. 5 - Prob. 1ECh. 5 - Prob. 2ECh. 5 - Prob. 3.1E
Ch. 5 - Prob. 3.2ECh. 5 - Prob. 4ECh. 5 - Carlton Company is an 80%- owned subsidiary of...Ch. 5 - Carlton Company is an 80%- owned subsidiary of...Ch. 5 - Prob. 6.1ECh. 5 - Prob. 6.2ECh. 5 - Prob. 7.1ECh. 5 - Prob. 7.2ECh. 5 - Prob. 7.3ECh. 5 - Prob. 8.1ECh. 5 - Prob. 8.3ECh. 5 - Prob. 9ECh. 5 - Prob. 5.1.1PCh. 5 - Prob. 5.1.2PCh. 5 - Prob. 5.2PCh. 5 - Prob. 5.3PCh. 5 - Prob. 5.4PCh. 5 - Prob. 5.5PCh. 5 - Prob. 5.6PCh. 5 - Prob. 5.7PCh. 5 - Prob. 5.8.1PCh. 5 - Prob. 5.8.2PCh. 5 - Prob. 5.9PCh. 5 - Prob. 5.10PCh. 5 - Prob. 5.14PCh. 5 - Prob. 5.2.1CCh. 5 - Prob. 5.2.2CCh. 5 - Prob. 5.3.1CCh. 5 - Prob. 5.3.2CCh. 5 - Prob. 5.3.3CCh. 5 - Prob. 5.3.4C
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