On May 4, 2XX2, an investor company owns 30% of the outstanding common stock of an...
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On May 4, 2XX2, an investor company owns 30% of the outstanding common stock of an investee and can exercise significant influence over the investee. On May 4, 2XX2, immediately preceding the sale of 20% of the investee's outstanding common stock to an unaffiliated party, the balance of the Equity Investment account was $84,000. The investor company sold the 20% interest in the investee for $72,000. The investor company determined that after the sale of its 20% interest it could no longer exert significant influence over the investee. For each of the following conditions, provide (i) the realized gain (loss) on the sale of the 20% interest and (ii) the unrealized holding gain (loss) on the remaining 10% interest. Use a negative sign to indicate a loss recorded on May 4, 2XX2. If no gain (loss) is required, enter "0" into the blank. a. Assume the investor determined the investee's stock has a readily determinable fair value. (i) realized gain (loss) $ (46,800) (ii) unrealized holding gain (loss) 0 b. Assume the investor determined the investee's stock does not have a readily determinable fair value, and the transaction resulting in the loss of significant influence does qualify as an observable price change in orderly transactions for the identical or a similar investment of the same issuer. (i) realized gain (loss) $ (ii) unrealized holding gain (loss) $ 0 c. Assume the investor determined the investee's stock does not have a readily determinable fair value, and the transaction resulting in the loss of significant influence does not provide an observable price change in orderly transactions for the identical or a similar investment of the same issuer. In addition, after the loss of significant influence, the investor does not wish to apply the Level 2 and Level 3 measurement techniques described in FASB ASC 820: Fair Value Measurement. (i) realized gain (loss) $ 0 (ii) unrealized holding gain (loss) $ 0 On May 4, 2XX2, an investor company owns 30% of the outstanding common stock of an investee and can exercise significant influence over the investee. On May 4, 2XX2, immediately preceding the sale of 20% of the investee's outstanding common stock to an unaffiliated party, the balance of the Equity Investment account was $84,000. The investor company sold the 20% interest in the investee for $72,000. The investor company determined that after the sale of its 20% interest it could no longer exert significant influence over the investee. For each of the following conditions, provide (i) the realized gain (loss) on the sale of the 20% interest and (ii) the unrealized holding gain (loss) on the remaining 10% interest. Use a negative sign to indicate a loss recorded on May 4, 2XX2. If no gain (loss) is required, enter "0" into the blank. a. Assume the investor determined the investee's stock has a readily determinable fair value. (i) realized gain (loss) $ (46,800) (ii) unrealized holding gain (loss) 0 b. Assume the investor determined the investee's stock does not have a readily determinable fair value, and the transaction resulting in the loss of significant influence does qualify as an observable price change in orderly transactions for the identical or a similar investment of the same issuer. (i) realized gain (loss) $ (ii) unrealized holding gain (loss) $ 0 c. Assume the investor determined the investee's stock does not have a readily determinable fair value, and the transaction resulting in the loss of significant influence does not provide an observable price change in orderly transactions for the identical or a similar investment of the same issuer. In addition, after the loss of significant influence, the investor does not wish to apply the Level 2 and Level 3 measurement techniques described in FASB ASC 820: Fair Value Measurement. (i) realized gain (loss) $ 0 (ii) unrealized holding gain (loss) $ 0
Expert Answer:
Answer rating: 100% (QA)
a i The realized gain loss on the sale of the 20 interest is calculated as follows Sales proceeds from the sale of the 20 interest 72000 Carrying amount of the 20 interest 20 x 84000 16800 Realized ga... View the full answer
Related Book For
Intermediate accounting
ISBN: 978-0077647094
7th edition
Authors: J. David Spiceland, James Sepe, Mark Nelson
Posted Date:
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