Utah Exchange Company completed the following long term investment transactions during 2016 2016 May 12 Purchased 21,000 shares, which make up 45 of the common stock of Exeter Corporation at total cost of $340,000 Jul 9 Received annual cash dividend of $1 21 per share on Exeter investment Sep 16 Pu...

Req 1 Current fair value is used to account for the availableforsale investment in Amsterdam Inc bec ...

Utah Exchange Company completed the following long-term investment transactions during 2016: 2016 May 12 ......... Purchased 21,000

Question:

Utah Exchange Company completed the following long-term investment transactions during 2016:
2016
May 12 ......... Purchased 21,000 shares, which make up 45% of the of Exeter at total cost of $340,000.
Jul 9 ........ Received annual cash of $1.21 per share on Exeter investment.
Sep 16 ..... Purchased 1,100 shares of Amsterdam, Inc., as an available-for sale investment, paying $42.25 per share.
Oct 30 ...... Received cash of $0.34 per share on the Amsterdam investment.
Dec 31 ...... Received annual report from Exeter Net income for the year was $580,000.
At year-end, the fair value of the Amsterdam stock is $30,900. The fair value of the Exeter stock is $652,000.
Requirements
1. For which investment is fair value used in the accounting? Why is fair value used for one investment and not the other?
2. Show what Utah Exchange would report on its year-end balance sheet, income statement, and statement of comprehensive income for these investment transactions. It is helpful to use a T-account for the Equity-method Investment account. Ignore income tax.
Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...