midterm Flashcards
(11 cards)
Equity securities: investor’s ownership interest <__% is insignificant and requires _____ method
<20%; cost method
Date of purchase of equity security <20% cost method JOURNAL ENTRY
Dr. Investments 15,300
Cr. Cash 15, 300
Date of purchase of equity security <20% equity method JOURNAL ENTRY
Dr. Investments 15,300
Cr. Cash 15,300
Income earned by company = cost method equity security
NO JOURNAL ENTRY
Income earned by company = equity method equity security
Dr. Investments (% x revenue)
Cr. Equity in Earnings
Cash dividends for equity security cost method
Dr. Cash
Cr. Dividend revenue
Cash dividends for equity security equity method
Dr. Cash
Cr. Investment
Sale of investment: cost method of equity security
Dr. Cash 14,700
Cr. Investment 7650
Cr. Gain 7050
$30/share x 500 shares - (15,000 x 2%)
15,300 x 1/2
Plug for gain
Sale of investment: equity method of equity security
Dr. Cash 14,700
Dr. Loss 5950
Cr. Investment 20,650
Investment in stock T-account
41,300 x 1/2
Plug for loss
Equity securities in which own <20% - Use Fair Value Method
For unrealized gain: Investments and FVA T-account are _____ accounts
Adjunct
Equity securities in which own <20% - Use Fair Value Method
For unrealized loss: Investments and FVA T-account are ______ accounts
Contra
