Accounted for using the equity method

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ACG 4201 Homework 1

On Jan. 1, 2016, you made two investments, one in Co. A and the other in Co. B. Information regarding these two investments is as follows (NI, Div Paid, and FMV are totals as reported by each company in each year):

St:hym          Cost                             Year 1                                              Year 2

                                               Div            Dec. 31          Selling           'Div           Dec. 31

                              NI             Paid               FMV              Price       _NI__           Paid               FMV

Co. A 20% $27000 $19400          52200            $61000        $24700

Co. B 30%           35600             20700        3600       158300               $10600            $1900   $175800

Required:

1. Assume Co. A and Co. B are classified as available for sole investments, determine dollar amounts for each of the following. For balances, label the amount as either a "debit" or "credit" balance. For Income effects, indicate an increase as a "+" (plus) and a decrease as a "-" (minus).

a.   The balance in the combined Investment account is:

End of Yr. 1_______________________________ End of Yr. 2________________________________

b.   The balance in the combined Fair Value Adiustment account is:

End of Yr. 1__________________________________________ End of Yr. 2________________________________

c.   The balance In the combined Unrealized Loss (Gain) account in AOCI is:

End of Yr. 1__________________________________________ End of Yr. 2______________________________

d.   The effect of these investments on net income is:

Yr. 1_________________________________________________ Yr. 2_________________________________________________

2. Assume both investments are accounted for using the Equity Method, determine dollar amounts for each of the following. For balances, label the amount as either a "debit" or "credit" balance. For income effects, indicate an increase as a "+" (plus) and a decrease as a "-" (minus).

a.   The balance in the combined Investment account is:

End of Yr. 1___________________________________________ End of Yr. 2_______________________________

b.   The effect of these investments on net Income is:

 1__________________________________________________ Yr. 2_____________________________________

Reference no: EM131053553

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