On January 4, 20Y6, Spandella Company purchased 84,000 shares ofFilington Company directly from one of the founders for a price of$38 per share. Filington has 300,000 shares outstanding, includingthe Spandella shares. On July 2, 20Y6, Filington paid $244,000 intotal dividends to its shareholders. On December 31, 20Y6,Filington reported a net income of $755,000 for the year. Spandellauses the equity method in accounting for its investment inFilington.
a. Journalize the Spandella Inc. entries forthe transactions involving its investment in Filington Companyduring 20Y6.
20Y6 Jan. 4 20Y6 July 2 20Y6 Dec. 31
b. Determine the December 31, 20Y6, balance ofthe investment in Filington Company stock account.
On January 4, 20Y6, Spandella Company purchased 84,000 shares ofFilington Company directly from one of the founders for a price of$38 per share. Filington has 300,000 shares outstanding, includingthe Spandella shares. On July 2, 20Y6, Filington paid $244,000 intotal dividends to its shareholders. On December 31, 20Y6,Filington reported a net income of $755,000 for the year. Spandellauses the equity method in accounting for its investment inFilington.
a. Journalize the Spandella Inc. entries forthe transactions involving its investment in Filington Companyduring 20Y6.
| 20Y6 Jan. 4 | |||
| 20Y6 July 2 | |||
| 20Y6 Dec. 31 | |||
b. Determine the December 31, 20Y6, balance ofthe investment in Filington Company stock account.
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Related questions
| Gant Company purchased 30 percent of the outstanding shares of Temp Company for $82,000 on January 1, 20X6. The following results are reported for Temp Company: |
| 20X6 | 20X7 | 20X8 | |||||||
| Net income | $ | 44,000 | $ | 39,000 | $ | 64,000 | |||
| Dividends paid | 12,000 | 30,000 | 17,000 | ||||||
| Fair value of shares held by Gant: | |||||||||
| January 1 | 82,000 | 101,000 | 98,000 | ||||||
| December 31 | 101,000 | 98,000 | 109,000 | ||||||
| Required: |
| Determine the amounts reported by Gant as income from its investment in Temp for each year and the balance in Gantâs investment in Temp at the end of each year assuming that Gant uses the following methods in accounting for its investment in Temp: |
| a. | Cost method. |
| b. | Equity method. |
| c. | Fair value method. |
On January 2, 2016, Alpha Company purchased 25,000 shares ofBravo Company stock on the open market for $50 per share as along-term investment. On both June 15 and December 15, BravoCompany paid $50,000 in dividends for a total annual dividend of$100,000. On December 31, Bravo Company reported net income of$400,000 and the stock had a market value of $75 per share. BothAlpha and Bravo operate on a calendar year.
Part A â Assume that at all times during the year there were250,000 shares of Bravo Company stock outstanding.
Record the journal entries for the purchase of the stock, thedividends, and the reporting of income at year end on Alpha Companybooks.
State what the year-end value of the stock investment account ison the Alpha Company books.
Part B â Assume that at all times during the year there were100,000 shares of Bravo Company stock outstanding.
Record the journal entries for the purchase of the stock, thedividends, and the reporting of income at year end on Alpha Companybooks.
State what the year-end value of the stock investment account ison the Alpha Company books.
ACCT 221 Quiz # 1
ANSWER SHEET FOR PROBLEM 2
PROBLEM 2, PART A
DATE | ACCOUNT TITLE | DEBIT | CREDIT |
The Stock investment account had a ____________ balance of$_____________ at year end.
(debit or credit balance?)
PROBLEM 2, PART A
DATE | ACCOUNT TITLE | DEBIT | CREDIT |
The Stock investment account had a ____________ balance of$_____________ at year end.
(debit or credit balance?)
