高級(jí)會(huì)計(jì)學(xué)（第10版）習(xí)題答案 ch02-Beams10e-sm

Chapter2

STOCKINVESTMENTS—INVESTORACCOUNTINGANDREPORTING

AnswerstoQuestions

1Onlytheinvestor'saccountsareaffectedwhenoutstandingstockisacquiredfromexistingstockholders.

Theinvestorrecordstheinvestmentatitscost.Sincetheinvesteecompanyisnotaparlytothetransaction,

itsaccountsarenotaffected.

Bothinvestorandinvesteeaccountsareaffectedwhenunissuedstockisacquireddirectlyfromthe

investee.TheinvestorrecordstheinvestmentatitscostandtheinvesteeadjustsitsassetandownersJ

equityaccountstoreflecttheissuanceofpreviouslyunissuedstock.

2Goodwillarisingfromanequityinvestmentof20percentormoreisnotrecordedseparatelyfromthe

investmentaccount.Undertheequitymethod,theinvestmentispresentedononelineofthebalancesheet

inaccordancewiththeone-lineconsolidationconcept.

3Dividendsreceivedfromearningsaccumulatedbeforeaninvestmentisacquiredaretreatedasdecreasesin

theinvestmentaccountbalanceunderthefairvalue/costmethod.Suchdividendsareconsideredareturnof

apartoftheoriginalinvestment.

4Theequitymethodofaccountingforinvestmentsincreasestheinvestmentaccountfbrtheinvestor'sshare

oftheinvestee'sincomeanddecreasesitfbrtheinvestor'sshareoftheinvestee'slossesandfbrdividends

receivedfromtheinvestee.Inaddition,theinvestmentandinvestmentincomeaccountsareadjustedfor

amortizationofanyinvestmentcost-bookvaluedifferentialsrelatedtotheinterestacquired.Adjustments

totheinvestmentandinvestmentincomeaccountsarealsoneededforunrealizedprofitsandlossesfrom

transactionsbetweentheinvestorandinvesteecompanies.AfairvalueadjustmentisoptionalunderSFAS

No.159.

5Theequitymethodisreferredtoasaone-lineconsolidationbecausetheinvestmentaccountisreportedon

onelineoftheinvestor'sbalancesheetandinvestmentincomeisreportedononelineoftheinvestor's

incomestatement(exceptwhentheinvesteehasextraordinaryorcumulative-effecttypeadjustments).In

addition,theinvestmentincomeiscomputedsuchthattheparentcompany'sincomeandstockholders9

equityareequaltotheconsolidatednetincomeandconsolidatedstockholders?equitythatwouldresultif

thestatementsoftheinvestorandinvesteewereconsolidated.

6Iftheequitymethodofaccountingisappliedcorrectly,theincomeoftheparentcompanywillgenerally

equalthecontrollinginterestshareofconsolidatednetincome.

7Thedifferenceintheequitymethodandconsolidationliesinthedetailreported,butnotintheamountof

incomereported.Theequitymethodreportsinvestmentincomeononelineoftheincomestatement

whereasthedetailsofrevenuesandexpensesarereportedintheconsolidatedincomestatement.

8Theinvestmentaccountbalanceoftheinvestorwillequalunderlyingbookvalueoftheinvesteeif(a)the

equitymethodiscorrectlyapplied,(b)theinvestmentwasacquiredatbookvaluewhichwasequaltofair

value,thepoolingmethodwasused,orthecost-bookvaluedifferentialshaveallbeenamortized,and(c)

therehavebeennointercompanytransactionsbetweentheaffiliatedcompaniesthathavecreated

investmentaccount-bookvaluedifferences.

9Theinvestmentaccountbalancemustbeconvertedfromthecosttotheequitymethodwhenacquisitions

increasetheinterestheldto20percentormore.Theamountoftheadjustmentisthedifferencebetweenthe

investmentincomereportedunderthecostmethodinprioryearsandtheincomethatwouldhavebeen

reportediftheequitymethodofaccountinghadbeenused.Changesfromthecosttotheequitymethodof

accountingforequityinvestmentsarechangesinthereportingentitythatrequirerestatementofprior

years'financialstatementswhentheeffectismaterial.

13

14StockInvestments-InvestorAccountingandReporting

10Theone-lineconsolidationisadjustedwhentheinvestee'sincomeincludesextraordinaryitems,gainsor

lossesfromdiscontinuedoperations,orcumulative-effecttypeadjustments.Inthiscase,theinvestor's

shareoftheinvestee'sordinaryincomeisreportedasinvestmentincomeunderaone-lineconsolidation,

buttheinvestor'sshareofextraordinaryitems,cumulative-effecttypeadjustments,andgainsandlosses

fromdiscontinuedoperationsiscombinedwithsimilaritemsoftheinvestor.

11Theremaining15percentinterestintheinvesteeisaccountedforunderthefairvalue/costmethod,andthe

investmentaccountbalanceimmediatelyafterthesalebecomesthenewcostbasis.

12Yes.Whenaninvesteehaspreferredstockinitscapitalstructure,theinvestorhastoallocatetheinvestee's

incometopreferredandcommonstockholders.Then,theinvestortakesupitsshareoftheinvestee's

incomeallocatedtocommonstockholdersinapplyingtheequitymethod.Theallocationisnotnecessary

whentheinvesteehasonlycommonstockoutstanding.

13Goodwillimpairmentlossesarecalculatedbybusinessreportingunits.Foreachreportingunit,the

companymustfirstdeterminethefairvaluesofnetassets.Thefairvalueofthereportingunitistheamount

atwhichitcouldbepurchasedinacurrentmarkettransaction.Thismaybebasedonmarketprices,

discountedcashflowanalyses,orsimilarcurrenttransactions.Thisisdoneinthesamemannerasisdone

tooriginallyrecordacombination.Anyexcessmeasuredfairvalueisthefairvalueofgoodwill.The

companythencomparesthegoodwillfairvalueestimatetothecarryingvalueofgoodwilltodetermineif

therehasbeenanimpairmentduringtheperiod.

14Yes.Impairmentlossesforsubsidiariesarecomputedasoutlinedinthesolutiontoquestion13.Companies

comparefairvaluestobookvaluersforequitymethodinvestmentsasawhole.Firmsmayrecognize

impairmentsforequitymethodinvestmentsasawhole,butperformnoseparategoodwillimpairment.

15InitialimpairmentlossesrecordeduponadoptionofSFAS142aretreatedasthecumulativeeffectofan

accountingchange.Impairmentlossesresultingfromsubsequentannualreviewsareincludedinthe

calculationofincomefromoperations.

SOLUTIONSTOEXERCISES

SolutionE2-1

1d

2c

3c

4d

5b

SolutionE2-2[AICPAadapted]

1d

2b

3d

4b

Grade'sinvestmentisreportedatits$300,000costbecausetheequity

methodisnotappropriateandbecauseGradezsshareofMedium'sincome

exceedsdividendsreceivedsinceacquisition[($260,000x15%)>

$20,000].

5c

DividendsreceivedfromZafaeonforthetwoyearswere$10z500($70,000

7

x15%),butonly$9Z000(15%ofZafaconsincomeof$60,000forthetwo

years)isshownonTorquelzsincomestatementasdividendincomefrom

theZafaconinvestment.Theremaining$1,500reducestheinvestment

accountbalance.

6c

[$50,000+$150,000+($300,000x10%)]

7a

8d

InvestmentbalanceJanuary2$250,000

30,000

Add:IncomefromPod($100z000x30%)

InvestmentinPodDecember31$280,000

SolutionE2-3

1BowmanfspercentageownershipinTrevor

Bowman7s20,000shares/(60,000+20,000)shares=25%

2Goodwill

Investmentcost$500,000

Bookvalueacquired($1,000,000+$500,000)x25%375,000

Goodwill$125,000

SolutionE2-4

IncomefromMedleyfor2009

ShareofMedley'sincome($200,000x1/2yearx30%)$30,000

16StockInvestments-InvestorAccountingandReporting

SolutionE2-5

1IncomefromOakey

ShareofOakey'sreportedincome($800,000x30%)$240,000

Less:Excessallocatedtoinventory(100,000)

Less:Depreciationofexcessallocatedtobuilding(50,000)

($200,000/4years)

IncomefromOakey$90,000

2InvestmentaccountbalanceatDecember31

CostofinvestmentinOakey$2,000,000

Add:IncomefromOakey90,000

Less:Dividends(60,000)

InvestmentinOakeyDecember31$2,030,000

Alternativesolution

UnderlyingequityinOakeyatJanuary1($1,500,000/.3)$5,000,000

Incomelessdividends600,000

UnderlyingequityDecember315,600,000

Interestowned30%

BookvalueofinterestownedDecember311,680,000

Add:Unamortizedexcess350,000

InvestmentinOakeyDecember31$2,030,000

SolutionE2-6

JournalentryonMartin'sbooks

InvestmentinNeighbors120,000

Lossfromdiscontinuedoperations20,000

IncomefromKelly140,000

Torecognizeincomefrom40%investmentinNeighbors.

SolutionE2-7

1a

DividendsreceivedfromBennett($120,000x15%)$18,000

Shareofincomesinceacquisitionofinterest

2008($20,000x15%)(3,000)

(12,000)

2009($80z000x15%)

Excessdividendsreceivedovershareofincome$3,000

InvestmentinBennettJanuary3,2008$50,000

Less:Excessdividendsreceivedovershareofincome(3,000)

InvestmentinBennettDecember31,2009$47,000

2b

Costof10,000of40,000sharesoutstanding$1,400,000

Bookvalueof25%interestacquired($4,000,000

stockholders7equityatDecember31,2008+

$1,400,000fromadditionalstockissuance)x25%1,350,000

Excessfairvalueoverbookvalue(goodwill)$50,000

3d

TheinvestmentinMonroebalanceremainsattheoriginal

cost,

4c

Incomebeforeextraordinaryitem$200,000

Percentowned40%

IncomefromKrazyProducts$80,000

SolutionE2-8

Preliminarycomputations

Costof40%interestJanuary1,2008$2,400,000

Bookvalueacquired($4,000,000x40%)(1,600,000)

Excessfairvalueoverbookvalue$800,000

Excessallocatedto

Inventories$100,000x40%$40,000

Equipment$200,000x40%80,000

Goodwillfortheremainder680,000

Excessfairvalueoverbookvalue$800,00。

Raython7sunderlyingequityinTreaton($5,500,000x40%)$2,200,000

Add:Goodwill680,000

InvestmentbalanceDecember31,2012困880,000

Alternativecomputation

RaythonzsshareofthechangeinTreaton'sstockholdersA

equity($1,500,000x40%)$600,000

Less:Excessallocatedtoinventories($40,000x100%)(40,000)

(80,000)

Less:Excessallocatedtoequipment($80z000/4yearsx4years)

Increaseininvestmentaccount480,000

Originalinvestment2,400,000

InvestmentbalanceDecember31,2012$2,880,006

18StockInvestments-InvestorAccountingandReporting

SolutionE2-9

1IncomefromRunner

Shareofincometocommon($400z000-$30,000preferred

dividends)x30%$111，°°°

2InvestmentinRunnerDecember31,2009

NOTE:The$50,000directcostsofacquiringtheinvestment

mustbeexpensedwhenincurred.Theyarenotapartofthe

costoftheinvestment.

Investmentcost$1,200,000

Add:IncomefromRunner111,000

Less:DividendsfromRunner($200,000dividends-$30,000

dividendstopreferred)x30%(51,000)

InvestmentinRunnerDecember312009$1,260,00

z。

SolutionE2-10

1

IncomefromTree($300,000-100z000)x25%

InvestmentincomeOctober1toDecember31$25,000

2InvestmentbalanceDecember31

InvestmentcostOctober1$600,000

Add:IncomefromTree25,000

Less:Dividends

InvestmentinTreeDecember31$625,000

SolutionE2-11

Preliminarycomputations

Goodwillfromfirst10%interest:

Costofinvestment$50,000

Bookvalueacquired($420,000x10%)(42,000)

Excessfairvalueoverbookvalue$8,000

Goodwillfromsecond10%interest:

Costofinvestment$100,000

Bookvalueacquired($500,000x10%)(50,000)

Excessfairvalueoverbookvalue$50,000

1CorrectingentryasofJanuary2,2009to

convertinvestmenttotheequitybasis

Accumulatedgain/lossonstockavailablefor

Sale50,000

ValuationallowancetorecordSASatfair50,000

Value

Toremovethevaluationallowanceenteredon

December31,2009underthefairvaluemethod

foranavailableforsalesecurity.

InvestmentinTwizzle8Z000

Retainedearnings8,000

Toadjustinvestmentaccounttoanequitybasis

computedasfollows:

ShareofTwizzle'sincomefor2009$20,000

Less:Shareofdividendsfor2009(12,000)

$8,000

2IncomefromTwizzlefor2009

IncomefromTwizzleonoriginal10%investment$10,000

IncomefromTwizzleonsecond10%investment10,000

IncomefromTwizzle$20,000

20StockInvestments-InvestorAccountingandReporting

SolutionE2-12

Preliminarycomputations

Stockholders7equityofTallonDecember31,2008$380,000

Saleof12,000previouslyunissuedsharesonJanuarylf2009250,000

Stockholders^equityafterissuanceonJanuary1,2009$630,000

Costof12,000sharestoRiver$250,000

Bookvalueof12,000sharesacquired

$630,000x12,000/36,000shares210,000

Excessfairvalueoverbookvalue$40,000

Excessisallocatedasfollows

Buildings$60,000x12,000/36,000shares$20z000

Goodwill20,000

Excessfairvalueoverbookvalue$40,000

JournalentriesonRiver'sbooksduring2009

January1

InvestmentinTall250,000

Cash250,000

Torecordacquisitionofa1/3interestinTall.

During2009

Cash30,000

InvestmentinTall30,000

TorecorddividendsreceivedfromTall($90,000x1/3).

December31

InvestmentinTall38z000

IncomefromTall38,000

TorecordinvestmentincomefromTallcomputedas

follows:

ShareofTail'sincome($120,000x1/3)$40z000

Depreciationonbuilding($20z000/10years)(2,000)

IncomefromTall$38,000

SolutionE2-13

1JournalentriesonBIPfsbooksfor2009

Cash30,000

InvestmentinCrown(30%)30,000

TorecorddividendsreceivedfromCrown

($100,000x30%).

InvestmentinCrown(30%)60,000

Extraordinaryloss(fromCrown)6Z000

IncomefromCrown66,000

TorecordinvestmentincomefromCrowncomputed

asfollows:

Shareofincomebeforeextraordinaryitem

$170,000x30%$51,000

Add:Excessfairvalueovercostrealized

in2009

$50,000x30%15,000

IncomefromCrownbeforeextraordinary$66,000

loss

2InvestmentinCrownbalanceDecember31,2009

Investmentcost$195,000

Add:IncomefromCrownafterextraordinaryloss60,000

Less:DividendsreceivedfromCrown(30,000)

InvestmentinCrownDecember31$225,000

Check:Investmentbalanceisequaltounderlyingbookvalue

($700,000+$150,000-$100,000)x30%=$225,000

3BIPCorporation

IncomeStatement

fortheyearendedDecember31,2009

Sales$1,000,000

Expenses700,000

Operatingincome300,000

IncomefromCrown(beforeextraordinaryitem)____66,000

Incomebeforeextraordinaryitem366,000

Extraordinaryloss(netoftaxeffect)6,000

Netincome$360,000

SolutionE2-14

1IncomefromWaterfor2009

Equityinincome($108,000-$8,000preferred)x40%$40,000

2InvestmentinWaterDecember31,2009

CostofinvestmentinWatercommon$290,000

Add:IncomefromWater40,000

Less:Dividends(16,000)

InvestmentinWaterDecember31$314,000

22StockInvestments-InvestorAccountingandReporting

SolutionE2-15

SincethetotalvalueofSteelehasdeclinedby$60,000whilethefairvalue

ofthenetidentifiableassetsisunchanged,the$60,000declineisthe

impairmentingoodwillfortheperiod.Assumingthisisnottheinitial

adoptionofSFAS142,the$60,000impairmentlossisdeductedincalculating

Park'sincomefromcontinuingoperations.

SolutionE2-16

Goodwillimpairmentsarecalculatedatthebusinessreportingunitlevel.

Increasesanddecreasesinfairvaluesacrossbusinessunitsarenot

offsetting.Flashmustreportanimpairmentlossof$5,000incalculating2009

incomefromcontinuingoperations.

SOLUTIONSTOPROBLEMS

SolutionP2-1

1Goodwill

CostofinvestmentinTellyonApril1$343,000

Bookvalueacquired:

NetassetsatDecember31$1,000,000

Add:Incomefor1/4year($120,000x25%)30,000

Less:DividendspaidMarch15(20,000)

BookvalueatApril11,010,000

Interestacquired30%303,000

GoodwillfrominvestmentinTelly$40,000

2IncomefromTellyfor2009

Equityinincomebeforeextraordinaryitem

($120,000x3/4yearx30%)$27,000

ExtraordinarygainfromTelly($40,000x30%)12,000

IncomefromTelly$39,000

3InvestmentinTellyatDecember31,2009

InvestmentcostApril1$343,000

Add:IncomefromTellyplusextraordinarygain39,000

(18,000)

Less:Dividends($20z000x3quarters)x30%

Investmentin