AC 501 help A Guide to career/Snaptutorial AC 501 help A Guide to career/Snaptutorial | Page 7

Cash
$ 50
Receivables
200
Property, plant, and equipment (net)
2,600 Goodwill
200 Less: Notes payable
(2,700)
Net assets
$ 350
The purpose of the Carlos division is to develop a nuclear-powered aircraft. If
successful, traveling delayes associated with refueling could be substantially
reduced. Many other benefits would also occur. To date, management has not had
much success and is deciding whether a writ-down at this time is appropriate.
Management estimated its future net cash flows from the project to be $ 400 million.
Management has also received an offer to purchase the division for $ 335 million. All
identifiable assets’ and liabilities’ book and fair value amounts are the same.
Instructions
Prepare the journal entry (if any) to record the impairment at December 31, 2008.
At December 31, 2009, it is estimated that the division’s fair value increased to $ 345
million. Prepare the journal entry (if any) to record this increase in fair value.
E14-6: (Entries for Available-for-sale and Trading Securities) The following
information is available Barkley Company at December 31, 2008, regarding its
investments.
Securities
Cost
Fair Value
3,000 shares of Myers Corporation Common Stock
$ 40,000
$
48,000
1,000 shares of Cole Incorporated Preferred Stock
25,000
22,000
$ 65,000
$
70,000
Instructions
Prepare the adjusting entry (if any) for 2008, assuming the securities are classified
as trading.
Prepare the adjusting entry (if any) for 2008, assuming the securities are classified
as available-for-sale.
Discuss how the amounts reported in the financial statements are affected by the
entries in (a) and (b).
E14-13: (Equity Method) Parent Co. invested $ 1, 000,000 in Sub Co. for 25% of its
outstanding stock. Sub Co. pays out 40% of net income in dividends each year.
Investment in Sub Co.
1,000,000
110,000
44,000
Instructions:
How much was Parent Co.’s shares of Sub Co.’s net income for the year?
How much was Parent Co.’s shares of Sub Co.’s dividends for the year?
What was Sub Co.’s total net income for the year?
What was Sub Co.’s total dividends for the year?