On January 1, 2020 ABC purchased 100,000 shares of XYZ common shares at purchase price of...

 

Transcribed Image Text:

On January 1, 2020 ABC purchased 100,000 shares of XYZ common shares at purchase price of $13 per share. The ownership of 100,000 shares gives ABCa 10% ownership stake in XYZ, which is insufficient to give ABC significant influence over the operations of XYZ. The fiscal year of ABC ends on December 31. XYZ's GAAP financials reported total net income of $1,500,000 for calendar year 2020. During that year, XYZ declared and paid of $0.50/share on June 30 and December 31st. ABC received the December 31 dividend payment on January 1, 2021. XYZ common stock, which is traded on the New York Stock Exchange, closed at $17 per share on December 31, 2020. All questions below pertain to the accounting for the investment by ABC. 1. Prepare all journal entries related to the equity investment that is necessary for ABC to issue GAAP compliant financial statements for the year ended December 31, 2020. Enter your answer below. Choose the account from the drop-down list in the yellow cell. Enter the amount of the entry in the green box. Entry to record purchase of stock on 1/1/2020: Account Debit Credit 1. 1 Entry to record receipt of dividend on 6/30/2020 (assume the dividend payment was received on 6/30): Account Debit Credit 32 Entries needed at 12/31/2020 33 34 Account Debit Credit 35 36 37 3 38 39 3 40 412. What will be the post-adjustment December 31, 2020 balance in the Investment in Stock account? 42 43 Enter your answer in the geen bo 45. What will be the post-adjustment December 31, 2020 balance (if any) in the Fair Value Adjustment 46 hocount? 47 48 Enter your answer in the green box 49 50 4. What amount of dividend revenue if any) will be reported on the 2020 income statement? $1 Enter your answr in the greern bos 53 545. What amount of equity in earnings of XYZ (if any) will be reported on the 2020 income statement? 55 56 57 Enter your anser the green box 5A D. At what amount will the investment in XYZ common stock be reported in the asset section of the so December 31, 2020 balance sheet? 62 Enter your anwer in the green bes 63 63 64 7. What amount of unrealized holding gain (if any) will be reported as a component of net income for the 65 year ended December 31, 2020? 66 67 Enter your answer in the green box 9 68 69 8. What amount of unrealized holding gain (if any) will be reported as a component of other 20 comprehensive income for the year ended December 31, 2020? 71 72 Enter your answer in the green box 10 73 74 9. Assume that ABC sold the stock on January 2, 2021 for $18/share. Prepare all entries to record the sale. 75 76 Account 77 Debit Credit 11 78 11 79 11 80 11 81 82 11 83 84 BS A 1 Column1 2 Allowance for Credit Loss 3 Cash 4 Credit Loss 5 Discount on Bond 6 Dividend receivable 7 Dividend revenue 8 Equity in earnings of XYZ 9 Fair Value Adjustment 10 Interest Revenue 11 Investment in Bond 12 Investment in XYZ common stock 13 Loss on Impairment (NI) 14 Premium on Bond 15 Realized Gain on Sale of Bond 16 Realized Gain on Sale of Stock 17 Realized Loss on Sale of Bond 18 Reclassification adjustment - OCI Unrealized Holding Gain - NI 20 Unrealized Holding Gain - OCI 21 Unrealized Holding Loss - NI 22 Unrealized Holding Loss - OCI 23 24 25 26 27 28 29 30 31 32 On January 1, 2020 ABC purchased 100,000 shares of XYZ common shares at purchase price of $13 per share. The ownership of 100,000 shares gives ABCa 10% ownership stake in XYZ, which is insufficient to give ABC significant influence over the operations of XYZ. The fiscal year of ABC ends on December 31. XYZ's GAAP financials reported total net income of $1,500,000 for calendar year 2020. During that year, XYZ declared and paid of $0.50/share on June 30 and December 31st. ABC received the December 31 dividend payment on January 1, 2021. XYZ common stock, which is traded on the New York Stock Exchange, closed at $17 per share on December 31, 2020. All questions below pertain to the accounting for the investment by ABC. 1. Prepare all journal entries related to the equity investment that is necessary for ABC to issue GAAP compliant financial statements for the year ended December 31, 2020. Enter your answer below. Choose the account from the drop-down list in the yellow cell. Enter the amount of the entry in the green box. Entry to record purchase of stock on 1/1/2020: Account Debit Credit 1. 1 Entry to record receipt of dividend on 6/30/2020 (assume the dividend payment was received on 6/30): Account Debit Credit 32 Entries needed at 12/31/2020 33 34 Account Debit Credit 35 36 37 3 38 39 3 40 412. What will be the post-adjustment December 31, 2020 balance in the Investment in Stock account? 42 43 Enter your answer in the geen bo 45. What will be the post-adjustment December 31, 2020 balance (if any) in the Fair Value Adjustment 46 hocount? 47 48 Enter your answer in the green box 49 50 4. What amount of dividend revenue if any) will be reported on the 2020 income statement? $1 Enter your answr in the greern bos 53 545. What amount of equity in earnings of XYZ (if any) will be reported on the 2020 income statement? 55 56 57 Enter your anser the green box 5A D. At what amount will the investment in XYZ common stock be reported in the asset section of the so December 31, 2020 balance sheet? 62 Enter your anwer in the green bes 63 63 64 7. What amount of unrealized holding gain (if any) will be reported as a component of net income for the 65 year ended December 31, 2020? 66 67 Enter your answer in the green box 9 68 69 8. What amount of unrealized holding gain (if any) will be reported as a component of other 20 comprehensive income for the year ended December 31, 2020? 71 72 Enter your answer in the green box 10 73 74 9. Assume that ABC sold the stock on January 2, 2021 for $18/share. Prepare all entries to record the sale. 75 76 Account 77 Debit Credit 11 78 11 79 11 80 11 81 82 11 83 84 BS A 1 Column1 2 Allowance for Credit Loss 3 Cash 4 Credit Loss 5 Discount on Bond 6 Dividend receivable 7 Dividend revenue 8 Equity in earnings of XYZ 9 Fair Value Adjustment 10 Interest Revenue 11 Investment in Bond 12 Investment in XYZ common stock 13 Loss on Impairment (NI) 14 Premium on Bond 15 Realized Gain on Sale of Bond 16 Realized Gain on Sale of Stock 17 Realized Loss on Sale of Bond 18 Reclassification adjustment - OCI Unrealized Holding Gain - NI 20 Unrealized Holding Gain - OCI 21 Unrealized Holding Loss - NI 22 Unrealized Holding Loss - OCI 23 24 25 26 27 28 29 30 31 32

Answer rating: 100% (QA)

Answer 1 Date General journal Debit Credit Jan 1 2020 Investment in XYZ common stock 1300000 Cash 13... View the full answer