What amount of unrealized gain or loss should be

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Accounting Using Excel for Success
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Chapter 10 / Exercise 10-2A
Accounting Using Excel for Success
Reeve/Warren
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1. What amount of unrealized gain or loss should be reported in the income statementfor 2013? a. 280,000 lossb. 525,000 gainc. 420,000 lossd. 280,000 gain 2. What is the carrying amount of the investment for the year ended December31,2013? 3. What net amount of gain or loss should be recognized for 2014? 4. What is the carrying amount of the invesment for the year ended December 31,2014? Solution1:Answer (a)Market.Value-12/31/13 1,470,000Acquisition.Cost 1,750,000Unrealized gain in 2013 (280,000) Solution 2 Answer (c)
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Accounting Using Excel for Success
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Chapter 10 / Exercise 10-2A
Accounting Using Excel for Success
Reeve/Warren
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Carrying Amount- 12/31/13 ( 35,000 × 42 ) 1,470,000Solution 3 Answer (b)Market value of remaining shares (20,000 × 38) 760,000 Carrying amount (20,000 × 42) 840,000Loss from change in fair value (80,000)Net gain ( 345,000 - 80,000 ) 265,000Solution 4Answer bCarrying amount- 12/31/14 (20,000 × 42) 840,000INVESTMENT IN EQUITY SECURITIES (PROBLEMS)PROBLEM 1On January 1, 2016, ShangrilaCompany purchased 4,000 shares of another entity atP100 per share. Transaction costs amounted to P12,000. The investment is measuredat fair value through other comprehensive income.A P5 dividend per share had been declared on December 15, 2016, to be paid on March 31, 2016 to shareholders of record on January 31, 2016. No other transactionoccurred in 2016 affecting the investment.What is the initial measurement of the investment on January 1, 2016? a. 380,000
b. 400,000c. 412,000d. 392,000Solution: Answer (a)Fair Value (4,000 x 100) P400,000Transaction Cost 12,000Carrying Amount P412,000Less: Dividends (4,000 x 5) ( 20,000)Investment in Stocks P392,000PROBLEM 2On January 1, 2012, Joey Company purchased 20,000 shares of Bay Company, P100par, at P110 per share. On March 1, 2012, Bay Company issued rights to JoeyCompany, each permitting the purchase of ¼ share at par. No entry was made. The bidLion of the share was 140 and there was no quoted pLion for the rights. On April 1,2012, Joey Company paid for the new shares charging the payment to the investmentaccount.Since Joey Company felt that it had been assessed by Bay Company, the dividendsreceived from Bay Company in 2012 and 2013 (10% on December 31 of each year) arecredited to the investment account until the debit was fully offset. Bay Companydeclared annual dividend of P2,500,000 for the year ended December 31, 2012 and 2013. On January 1, 2014, Joey Company received 50% stock dividend from Bay Company. On same date, the shares received as stock dividend were sold at P160 per share and the proceeds were credited to income.On December 31, 2014, the shares of Bay Company were split 2 for 1. JoeyCompany found that each new share was worth P5 more than the P110 paid for the
original shares. Accordingly, Joey Company debited the investment account with theadditional shares received at P110 per share and credited income. On June 30,2015, Joey Company sold one-half of the investment at P92 per share and creditedthe proceeds to the investment account.What is the balance of the investment on December 31, 2015 as it was kept byJoey Company? Using the average method, what is the correct balance of the investment on

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