May I know how if my values match and make sense? If not please let me know why.
ID: 2592431 • Letter: M
Question
May I know how if my values match and make sense? If not please let me know why. How do I approach these transactions?
Assessing Financial Statement Effects of Equity Method Securities
Use the financial statement effects template to record the following transactions involving investments in marketable securities accounted for using the equity method (Balance Sheet & Income Statement):
a. Purchased 12,000 common shares of Bakersfield Co. at $8 per share; the shares represent 30% ownership in Bakersfield.
b. Received a cash dividend of $1.00 per common share from Bakersfield.
c. Bakersfield reported annual net income of $50,000.
d. Sold all 12,000 common shares of Bakersfield for $103,500.
Explanation / Answer
Balance sheet Income statement Transaction Cash asset + Non-Cash asset = Liabilities + Contrib. capital + Earned capital Revenues - Expenses = Net income a. (12000*8) -96000 96000 = b. (12000*1) 12000 -12000 c. (50000*30%) 15000 15000 15000 15000 d. 103500 -99000 4500 4500 4500 Notes: Journal entries Transaction Account titles Debit Credit a. Investment in associates 96000 Cash 96000 (Purchased 12,000 common shares of Bakersfield Co) b. Cash 12000 Investment in associates 12000 (Received a cash dividend) c. Investment in associates 15000 Investment reveue 15000 (Share in net income) d. Cash 103500 Investment in associates 99000 Gain on sale of investment 4500 (Sold all 12,000 common shares)