Learning Materials
Features
Discover
Chapter 10: Q14RQ. (page 567)
What does the rate of return on total assets measure, and how is it calculated?
The rate of return on total assets calculates theability of the company to generate income using its assets. It is calculated using the average total assets, net income, and interest expenses.
Over 30 million students worldwide already upgrade their learning with Vaia!
All the tools & learning materials you need for study success - in one app.
Get started for free
Accounting for equity investments
Strategic Investments completed the following investment transactions during 2018:
Jan. 14 Purchased 800 shares of Phyflexon stock, paying \(50 per share. The investment represents 4% ownership in Phyflexon’s voting stock. Strategic does not have significant influence over Phyflexon. Strategic intends to hold the investment for the indefinite future.
Aug. 22 Received a cash dividend of \)0.24 per share on the Phyflexon stock.
Dec. 31 Adjusted the investment to its current market value of \(45 per share.
31 Phyflexon reported net income of \)330,000 for the year ended 2018.
Requirements
2. Classify and prepare a partial balance sheet for Strategic’s Phyflexon investment as of December 31, 2018.
Accounting for equity investments
Captain Investments completed the following investment transactions during 2018:
Jan. 14 Purchased 200 shares of Velcon stock, paying \(53 per share. The investment represents 4% ownership in Velcon’s voting stock. Captain does not have significant influence over Velcon. Captain intends to hold the investment for the indefinite future.
Aug. 22 Received a cash dividend of \)0.28 per share on the Velcon stock.
Dec. 31 Adjusted the Velcon investment to its current market value of $58.
Requirements
Journalize the entries for 2018. Explanations are not required.
Question: S10-5 Accounting for debt investments
On February 1, 2018, Bell Co. decides to invest excess cash of \(16,800 by purchasing a Grant, Inc. bond at face value. At year-end, December 31, 2018, the fair value of the Grant bond was \)19,600. The investment is categorized as a trading debt investment.
Requirements
1. Journalize the transactions for Bell’s investment in Grant, Inc. for 2018.
What is equity security?
Classifying and accounting for equity investments
Boston Today Publishers completed the following investment transactions during 2018 and 2019:
2018
Dec. 6 Purchased 2,500 shares of Loveable stock at a price of \(24.00 per share, intending to sell the investment next month. Boston did not have significant influence over Loveable.
23. Received a cash dividend of \)1.50 per share on the Loveable stock.
31. Adjusted the investment to its market value of \(11.00 per share.
2019
Jan. 27 Sold the Loveable stock for \)18.20 per share.
Requirements
On December 31, 2018, how would the Loveable stock be classified and at what value would it be reported on the balance sheet?
What do you think about this solution?
We value your feedback to improve our textbook solutions.
Explanations 
Textbooks 
Exams 
GCSE 
IGCSE 
AS 
A Level 
International A Level 
University Admissions Tests 
Flashcards 
Vaia AI 
Notes 
Study Plans 
Study Sets 
Find a job 
Find a degree 
Student Deals 
Magazine 
Mobile App