Fair Value / Equity method
Not what you're looking for?
Hello,
I started on this problem, but I think I am doing it wrong. Can someone show how to do this? I have attached an excel file to make it easier to read.
Fill in the dollar changes caused in the Investment account and Dividend Revenue or Investment Revenue account by each of the following transactions, assuming Maxey Company uses (a) the fair value method and (b) the equity method for accounting for its investments in Kerwin Company.
(a) Fair Value Method (b) Equity Method
Investment Dividend Investment Investment
Transaction Account Revenue Account Revenue
-------------------------------------------
1. At the beginning of Year 1, Maxey bought 30% of Kerwin's common stock at its book value. Total book value of all Kerwin's common stock was $1,800,000 on this date.
-------------------------------------------
2. During Year 1, Kerwin reported $100,000 of net income and paid $50,000 of dividends.
-------------------------------------------
3. During Year 2, Kerwin reported $40,000 of net income and paid $50,000 of dividends.
-------------------------------------------
4. During Year 3, Kerwin reported a net loss of $24,000 and paid $10,000 of dividends.
-------------------------------------------
5. Indicate the Year 3 ending balance in the Investment account, and cumulative totals for Years 1, 2, and 3 for dividend revenue and investment revenue.
-------------------------------------------
Purchase this Solution
Solution Summary
The solution explains the impact on the dividend and investment accounts using the fair value method and equity method
Purchase this Solution
Free BrainMass Quizzes
IPOs
This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)
Change and Resistance within Organizations
This quiz intended to help students understand change and resistance in organizations
Understanding the Accounting Equation
These 10 questions help a new student of accounting to understand the basic premise of accounting and how it is applied to the business world.
Cost Concepts: Analyzing Costs in Managerial Accounting
This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.
Operations Management
This quiz tests a student's knowledge about Operations Management