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    Snow Corporation Comparison of Fair Value & Equity Methods

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    Comparison of Fair Value and Equity Methods

    On January 1, 2012, Snow Corporation purchased 20% of the 200,000 outstanding shares of common stock of Garvey Company for $4.00 per share as a long-term investment.

    The purchase price of the shares was equal to their book value.

    The following information is available about Garvey for 2012 and 2013:

    End of 2012:
    Reported net income $80,000
    Cash dividends declared and paid $30,000
    Market value of shares $3.80 per share

    End of 2013:
    Reported net income $90,000
    Cash dividends declared and paid $35,000
    Market value of shares $4.25 per share

    1. Prepare journal entries to record this information, assuming:
    a). Snow uses the fair value method and the securities are classified as available-for-sale.
    b). Snow uses the equity method.

    2. Assume 10,000 of the Garvey shares are sold on January 4, 2014, by Snow for $4.25 per share. Prepare the journal entry for this sale, assuming:
    a). Snow uses the fair value method and the securities are classified as available-for-sale.
    b). Snow uses the equity method.

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    https://brainmass.com/business/financial-accounting-bookkeeping/snow-corporation-comparison-fair-value-equity-methods-565929

    Solution Summary

    Your guidance is in excel, attached, with a column for each method on each date. Click in the cells to see how the amount were computed.

    $2.19

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