Chapter 2 Problems - Assignment Problems For Chapter 2 Page...

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Assignment Problems For Chapter 2 (The solutions for these problems are only available in the solutions manual that has been provided to your instructor.) Assignment Problem Two - 1 (Held-For-Trading and Available-For-Sale Investments) On December 31, 2008, Vonex Ltd. acquires 4,200 of the outstanding voting shares of Morex Inc. at a cost of $72.00 per share. Vonex Ltd. pays no transaction costs on its purchase or sale of Morex Inc. shares. Vonex has a December 31 year end. During the year ending December 31, 2009, Morex Inc. declares and pays dividends of $1.05 per share. On December 31, 2009, the Morex shares are trading at $78.00 per share. On May 1, 2010, Vonex sells the 4,200 Morex shares for proceeds of $56.00 per share. Morex did not declare any 2010 dividends prior this disposition. Required: For the period December 31, 2008 through May 1, 2010, provide the dated journal entries to account for the Morex shares, and calculate the effect of the investment in Morex shares on Venox’s Net Income under the following assumptions: A. Venox classifies the investment in Morex shares as held for trading. B. Venox classifies the investment in Morex shares as available for sale. Assignment Problem Two - 2 (Fair Value And Equity Methods) On December 31, 2007, the Miser Company purchased 25 percent of the outstanding voting shares of the Mercy Company, a public company, for $4 million in cash. On the acquisition date, all of the net identifiable assets of the Mercy Company had fair values that were equal to their carrying values. The carrying value of Mercy Company’s net assets was $16 million.
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