Anderson acquires 10 percent of the outstanding voting shares ofBarringer on January 1, 2013, for $102,520 and categorizes theinvestment as an available-for-sale security.
Barringer has a book value of $890,000 at January 1, 2013. The bookvalues of Barringerâs asset and liability accounts are consideredas equal to fair values except for a copyright whose valueaccounted for Andersonâs excess cost in each purchase. Thecopyright had a remaining life of 16 years at January 1,2013.
An additional 20 percent of the stock is purchased on January 1,2014, for $235,900, which gives Anderson the ability tosignificantly influence Barringer.
Barringer reports net income and dividends as follows. Theseamounts are assumed to have occurred evenly throughout these years.Dividends are declared and paid in the same period. Anderson usesthe equity method.
Year NetIncome Cash Dividends 2013 $196,000 $79,000 2014 243,200 116,000 2015 322,200 116,000
Anderson sells its entire investment in Barringer stock onJanuary 1, 2016 for $472,005.
In addition, the fair value of the Barringer shares isindeterminate.
Requirements:
a. Prepare all of the journal entries for Anderson regarding theirinvestment in Barringer stock.
1.
Record the acquisition of Barringer stock.
2.
Record Anderson's share of the income from Barringer for theyear 2013.
3.
Record the dividends received from Barringer for 2013.
4.
Record any amortization of revaluation increments and decrementsfor 2013.
5.
Record change in fair value of the investment in Barringer stockon December 31, 2013.
6.
Record any impairment of goodwill on December 31, 2013.
7.
Record the acquisition of Barringer stock.
8.
Record the restated reported figures for 2013 to the equitymethod.
9.
Record Anderson's share of the income for Barringer Company forthe year 2014.
10.
Record the dividends received from Barringer for 2014.
11.
Record any amortization of revaluation increments and decrementsfor 2014.
12.
Record change in fair value of investment in Marion Company onDecember 31, 2014.
13.
Record any impairment of goodwill on December 31, 2014.
14.
Record Anderson's share of the income for Barringer Company forthe year 2015.
15.
Record the dividends received from Barringer for 2015.
16.
Record any amortization of revaluation increments and decrementsfor 2015.
17.
Record change in fair value of the investment in Marion Companyon December 31, 2015.
18.
Record any impairment of goodwill on December 31, 2015.
19.
Record sale of Barringer stock.
b. What is the balance in the Investment in Barringer account onDecember 31, 2013?
c. What is the balance in the Investment in Barringer account onDecember 31, 2014?
d. What is the balance in the Investment in Barringer account onDecember 31, 2015?
e. What is the gain or loss on the shares of Barringer sold onJanuary 1, 2016?
Anderson acquires 10 percent of the outstanding voting shares ofBarringer on January 1, 2013, for $102,520 and categorizes theinvestment as an available-for-sale security. |
| Year | NetIncome | Cash Dividends |
| 2013 | $196,000 | $79,000 |
| 2014 | 243,200 | 116,000 |
| 2015 | 322,200 | 116,000 |
Anderson sells its entire investment in Barringer stock onJanuary 1, 2016 for $472,005. | ||
| In addition, the fair value of the Barringer shares isindeterminate.
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