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ACC 557 Week 8 Chapter 12 (E12 7 E12 8 E12 12 P12 2A) 2015 version

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EXERCISE 12-7

(a) Jan.  1 Stock Investments 180,000

Cash 180,000

Dec. 31 Cash ($60,000 X 25%)  15,000

Stock Investments  15,000

31 Stock Investments  50,000

Revenue from Stock Investments

($200,000 X 25%)  50,000

(b) Investment in Morelli, January 1 $180,000

Less: Dividend received   15,000

Plus: Share of reported income 50,000

Investment in Morelli, December 31 $215,000

Top of Form

Exercise 12-7

On January 1, Vince Corporation purchased a 25% equity in Morelli Corporation for $180,000. At December 31, Morelli declared and paid a $60,000 cash dividend and reported net income of $200,000.

(a)

Your answer is correct.

Journalize the transactions. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date

Account Titles and Explanation

Debit

Credit

Jan. 1

Dec. 31

(To record dividends received)

Dec. 31

(To record equity in Morelli Corporation’s net income

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ACC 557 Week 8 Chapter 12 (E12 7 E12 8 E12 12 P12 2A) 2015 version

  1. 1. ACC 557 Week 8 Chapter 12 (E12 7 E12 8 E12 12 P12 2A) Link : http://uopexam.com/product/acc-557-week-8-chapter-12-e12-7-e12-8-e12-12-p12-2a/ Sample content EXERCISE 12-7 (a) Jan. 1 Stock Investments 180,000 Cash 180,000
  2. 2. Dec. 31 Cash ($60,000 X 25%) 15,000 Stock Investments 15,000 31 Stock Investments 50,000 Revenue from Stock Investments ($200,000 X 25%) 50,000 (b) Investment in Morelli, January 1 $180,000 Less: Dividend received 15,000 Plus: Share of reported income 50,000 Investment in Morelli, December 31 $215,000 Top of Form Exercise 12-7 On January 1, Vince Corporation purchased a 25% equity in Morelli Corporation for $180,000. At December 31, Morelli declared and paid a $60,000 cash dividend and reported net income of $200,000. (a) Your answer is correct. Journalize the transactions. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit
  3. 3. Credit Jan. 1 Dec. 31 (To record dividends received) Dec. 31 (To record equity in Morelli Corporation’s net income) Click here if you would like to Show Work for this question Attempts: 1 of 3 used (b) Your answer is correct. Determine the amount to be reported as an investment in Morelli stock at December 31. Investment in Morelli December 31 $ Click here if you would like to Show Work for this question Attempts: 1 of 3 used Bottom of Form EXERCISE 12-8 1. 2014 Mar. 18 Stock Investments 390,000
  4. 4. Cash (200,000 X 15% X $13) 390,000 June 30 Cash 9,000 Dividend Revenue ($60,000 X 15%) 9,000 Dec. 31 Fair Value Adjustment—Non-Trading 60,000 Unrealized Gain or Loss—Equity ($450,000 – $390,000) 60,000 2. Jan. 1 Stock Investments 81,000 Cash (30,000 X 30% X $9) 81,000 June 15 Cash 9,000 Stock Investments ($30,000 X 30%) 9,000 Dec. 31 Stock Investments 24,000 Revenue from Stock Investments ($80,000 X 30%) 24,000 Top of Form Exercise 12-8 Your answer is correct. Presented below are two independent situations.
  5. 5. 1. Chicory Cosmetics acquired 15% of the 200,000 shares of common stock of Racine Fashion at a total cost of $13 per share on March 18, 2014. On June 30, Racine declared and paid a $60,000 dividend. On December 31, Racine reported net income of $122,000 for the year. At December 31, the market price of Racine Fashion was $15 per share. The stock is classified as non-trading. 2. Frank, Inc., obtained significant influence over Nowak Corporation by buying 30% of Nowak’s 30,000 outstanding shares of common stock at a total cost of $9 per share on January 1, 2014. On June 15, Nowak declared and paid a cash dividend of $30,000. On December 31, Nowak reported a net income of $80,000 for the year. Prepare all the necessary journal entries for 2014 for (a) Chicory Cosmetics and (b) Frank, Inc. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) No. Date Account Titles and Explanation Debit http://uopexam.com/product/acc-557-week-8-chapter-12-e12-7-e12-8-e12-12-p12-2a/

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