During the course of your examination of the financial statements of XYZ Corporation for the year...
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During the course of your examination of the financial statements of XYZ Corporation for the year ended December 31, 2016, you found a new account, "Investments." Your examination revealed that during 2016, XYZ began a program of investments, and all investment-related transactions were entered in this account. Your analysis of this account for 2016 follows: Date-2016 XYZ Corporation Analysis of Investments For the Year Ended December 31, 2016 (a) ABC Company Ordinary Shares Feb. 14 Purchased 8,800 shares @ $55 per share. July 26 Received 1,200 ordinary shares of ABC Company as a share dividend. (Memorandum entry in general ledger) Sept. 28 Sold the 500 ordinary shares of ABC Company received July 26 @ $60 per share. (b) EFG Inc. Ordinary Shares Apr. 30 Purchased 20,000 shares @ $40 per share. Oct. 28 Received dividend of $1.50 per share. Additional information: 1. The fair value for each security as of December 31, 2016 was as follows: Security ABC Co. EFG Inc. XYZ Corp. 2. All of the investments of XYZ are less than 20% considered by XYZ management to be non-trading. Debit $800,000 ONO CO SHARE OR FOST Credit $30,000 Credit $30,000 (1) Indicate whether (1) the Equity Investments, and (2) Net Income balances are understated or overstated and by how much as a result of the information related to investments in (a) and (b) schedules above. (2) Prepare the entry, if necessary, to record the proper valuation of the non-trading equity investment portfolio as of December 31, 2016. Assume that the fair value adjustment account has zero beginning balance. During the course of your examination of the financial statements of XYZ Corporation for the year ended December 31, 2016, you found a new account, "Investments." Your examination revealed that during 2016, XYZ began a program of investments, and all investment-related transactions were entered in this account. Your analysis of this account for 2016 follows: Date-2016 XYZ Corporation Analysis of Investments For the Year Ended December 31, 2016 (a) ABC Company Ordinary Shares Feb. 14 Purchased 8,800 shares @ $55 per share. July 26 Received 1,200 ordinary shares of ABC Company as a share dividend. (Memorandum entry in general ledger) Sept. 28 Sold the 500 ordinary shares of ABC Company received July 26 @ $60 per share. (b) EFG Inc. Ordinary Shares Apr. 30 Purchased 20,000 shares @ $40 per share. Oct. 28 Received dividend of $1.50 per share. Additional information: 1. The fair value for each security as of December 31, 2016 was as follows: Security ABC Co. EFG Inc. XYZ Corp. 2. All of the investments of XYZ are less than 20% considered by XYZ management to be non-trading. Debit $800,000 ONO CO SHARE OR FOST Credit $30,000 Credit $30,000 (1) Indicate whether (1) the Equity Investments, and (2) Net Income balances are understated or overstated and by how much as a result of the information related to investments in (a) and (b) schedules above. (2) Prepare the entry, if necessary, to record the proper valuation of the non-trading equity investment portfolio as of December 31, 2016. Assume that the fair value adjustment account has zero beginning balance.
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1 Indicate whether 1 the Equity Investments and 2 Net Income balances are understated or overstated and by how much as a result of the information related to investments in a and b schedules above a A... View the full answer
Related Book For
Intermediate Accounting
ISBN: 978-1119048541
11th Canadian edition Volume 2
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Nicola M. Young, Irene M. Wiecek, Bruce J. McConomy
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