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Chapter 13: Q14E (page 658)

(Equity Investment) Oregon Co. had purchased 200 shares of Washington Co. for \(40 each this year (Oregon

Co. does not have significant influence). Oregon Co. sold 100 shares of Washington Co. stock for \)45 each. At year-end, the price

per share of the Washington Co. the stock had dropped to $35.

Instructions

Prepare the journal entries for these transactions and any year-end adjustments.

Short Answer

Expert verified

Gain on the sale of the equity investment is $500

Unrealized holding loss on shares is $500

Step by step solution

01

Definition of Profit on sale

Profit on sale in share means when the share is sold for greater than the amount they purchased for.

02

Journal entries for the transactions

Date

Particulars

Debit

Credit

a

Equity Investment (200 * $40)

$8,000

Cash

$8,000

(Entry of purchase of 200 shares)

b

Cash ($45 * 100)

$4,500

Equity Investment (100 * $40)

$4,000

Gain on sale of shares

$500

(Being 200 shares sold for $45 each)

c

Unrealized Holding Loss

$500

Fair Value Adjustment

$500

(Being unrealized loss in holding shares)

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Most popular questions from this chapter

BE13-7 (L01) Kasten Inc. provides paid vacations to its employees. At December 31, 2017, 30 employees have each earned 2 weeks of vacation time. The employees’ average salary is $500 per week. Prepare Kasten’s December 31, 2017, adjusting entry.

(Fair Value Measurement Issues) Assume the same information as in E17-19 for Lilly Company. In addition,

assume that the investment in the Woods Inc. stock was sold during 2018 for \(195,000. On December 31, 2018, the following

information relates to its two remaining investments of common stock.

Cost Fair Value

(at purchase date) (at December 31)

Investment in Arroyo Company stock \)100,000 \(140,000

Investment in Lee Corporation stock 250,000 310,000

Total \)350,000 \(450,000

Net income before any security gains and losses for 2018 was \)905,000.

Instructions

(a) Compute the amount of net income or net loss that Lilly should report for 2018, taking into consideration Lilly’s securitytransactions for 2018.

(b) Prepare the journal entry to record unrealized gain or loss related to the investment in Arroyo Company stock atDecember 31, 2018.

Question: The presentation of current and non-current liabilities in the statement of financial position (balance sheet):

  1. is shown only on GAAP financial statements.
  2. is shown on both a GAAP and an IFRS statement of financial position.
  3. is always shown with current liabilities reported first in an IFRS statement of financial position.

(d)includes contingent liabilities under IFRS.

A typical provision is:

(a) bonds payable (c) a warranty liability

(2) cash (d) accounts payable

(Equity Method) Parent Co. invested $1,000,000 in Sub Co. for 25% of its outstanding stock. Sub Co. pays out

40% of net income in dividends each year.

Instructions

Use the information in the following T-account for the investment in Sub to answer the following questions.

Investment in Sub Co.

1,000,000

110,000

44,000

(a) How much was Parent Co.’s share of Sub Co.’s net income for the year?

(b) What was Sub Co.’s total net income for the year?

(c) What were Sub Co.’s total dividends for the year?

(d) How much was Parent Co.’s share of Sub Co.’s dividends for the year?
See all solutions

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