ACG 4201 Homework 1
On Jan. 1, 2016, you made two investments, one in Co. A and the other in Co. B. Information regarding these two investments is as follows (NI, Div Paid, and FMV are totals as reported by each company in each year):
St:hym Cost Year 1 Year 2
Div Dec. 31 Selling 'Div Dec. 31
NI Paid FMV Price _NI__ Paid FMV
Co. A 20% $27000 $19400 52200 $61000 $24700
Co. B 30% 35600 20700 3600 158300 $10600 $1900 $175800
Required:
1. Assume Co. A and Co. B are classified as available for sole investments, determine dollar amounts for each of the following. For balances, label the amount as either a "debit" or "credit" balance. For Income effects, indicate an increase as a "+" (plus) and a decrease as a "-" (minus).
a. The balance in the combined Investment account is:
End of Yr. 1_______________________________ End of Yr. 2________________________________
b. The balance in the combined Fair Value Adiustment account is:
End of Yr. 1__________________________________________ End of Yr. 2________________________________
c. The balance In the combined Unrealized Loss (Gain) account in AOCI is:
End of Yr. 1__________________________________________ End of Yr. 2______________________________
d. The effect of these investments on net income is:
Yr. 1_________________________________________________ Yr. 2_________________________________________________
2. Assume both investments are accounted for using the Equity Method, determine dollar amounts for each of the following. For balances, label the amount as either a "debit" or "credit" balance. For income effects, indicate an increase as a "+" (plus) and a decrease as a "-" (minus).
a. The balance in the combined Investment account is:
End of Yr. 1___________________________________________ End of Yr. 2_______________________________
b. The effect of these investments on net Income is:
1__________________________________________________ Yr. 2_____________________________________