what amount of unrealized loss should company a report at the end of the first year 558834

Comparing Fair Value and Equity Methods Company A purchased a certain number of Company B’s outstanding voting shares at $20 per share as a long term investment. Company B had outstanding 20,000 shares of $10 par value stock. Complete the following table relating to the measurement and reporting by Company A after acquisition of the shares of Company B stock.

Questions

Fair Value Method

Equity
Method

a. What level of ownership by Company A of Company B is required to apply the method?

%

%

For b, e, f, and g, assume the following:

Number of shares acquired of Company B stock

2,500

7,000

Net income reported by Company B in first year

$59,000

$59,000

Dividends declared by Company B in first year

$12,000

$12,000

Market price at end of first year, Company B stock

$17

$17

b. At acquisition, the investment account on the books of Company A should be debited at what amount? $_____ $_____

c. When should Company A recognize revenue earned on the stock of Company B? Explanation required. _____ _____

d. After the acquisition date, how should Company A change the balance of the investment account with respect to the stock owned in Company B (other than for disposal of the investment)? Explanation required. _____ _____

e. What is the balance in the investment account on the balance sheet of Company A at the end of the first year? $_____ $_____

f. What amount of revenue from the investment in Company B should Company A report at the end of the first year? $_____ $_____

g. What amount of unrealized loss should Company A report at the end of the first year? $_____ $_____

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