2811422517

2811422517 - Chapter 10 Long-Term Investments and...

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Chapter 10 Long-Term Investments and International Operations Check Points (10-15 min.) CP 10-1 1. Journal DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT 20X8 Jan. 14 Long-Term Investment (300 × $19) …... 5,700 Cash……………………………………. . 5,700 Aug. 22 Cash (300 × $1.25) ………………………. 375 Dividend Revenue……………………. 375 Dec. 31 Unrealized Loss on Investments……. .. 530 Allowance to Adjust Investment to Market ($5,700 – $5,170)…………. 530 2. ASSETS Total current assets…………………………………. .. $ XXX Long-term available-for-sale investments, at market value……………………………………. .. 5,170 STOCKHOLDERS’ EQUITY Common stock………………………………………… $ XXX Retained earnings……………………………………. . XXX Chapter 10 Long-Term Investments and International Operations 181
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Accumulated other comprehensive income: Unrealized (loss) on investments………………. . (530) (5-10 min.) CP 10-2 1. Journal DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT 20X9 Aug. 4 Cash (300 × $20.75) …………………… 6,225 Long-Term Investment……………. 5,700 Gain on Sale of Investment………. 525 2. This gain on sale of investment is a realized gain. The loss recorded at December 31, 20X8 was unrealized because it resulted from a change in the investment’s market value, not from the sale of the investment. Financial Accounting 6/e Solutions Manual 182
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(10-15 min.) CP 10-3 1. Equity method is appropriate because the investor holds a 40% investment in the investee company. 2. Journal ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT Millions a. Long-Term Investment…………………………. . 220 Cash……………………………………………. .. 220 To purchase equity-method investment. b. Long-Term Investment ($45 × .40) ……………. 18 Equity-Method Investment Revenue………. 18 To record investment revenue. c. Cash ($20 × .40) …………………………………. .. 8 Long-Term Investment………………………. 8 To receive cash dividend on equity-method investment. 3. Long-Term Investment (Amounts in millions) Purchase 220 Dividends received 8 Net income 18 Balance 230 Chapter 10 Long-Term Investments and International Operations 183
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(5 min.) CP 10-4 Millions Sale proceeds…………………………………………. .. $ 140 Carrying amount of the investment ($230 / 2)……. . (115 ) = Gain on sale of investment…………………………. .. $ 25 (10 min.) CP 10-5 1. A parent company is a corporation that owns a controlling (more than 50%) interest in another company. A subsidiary company is a company that is controlled by another corporation. 2.
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This homework help was uploaded on 04/07/2008 for the course ACCT 203 taught by Professor Fewox during the Spring '08 term at CofC.

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2811422517 - Chapter 10 Long-Term Investments and...

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