Exercise 12–17 (continued)
Requirement 2
Need to move from a fair-value adjustment from ($145,000) to ($70,000):
Fair-Value Adjustment
1/1/2018 145,000
Fair Value
Adjustment
Balance on 1/1/2018 ($145,000)
± Adjustment needed to update fair value ?
June 1, 2019
1) Updating the fair-value adjustment:
Need to move from a fair-value adjustment of ($6) to ($5):
Fair-Value
Adjustment
12/31/2018 6
Change needed 1
Fair-value adjustment………………………………………………………… 1
Unrealized holding gain—NI (to balance) ………………………….. 1
Exercise 12–18 (concluded)
2) Recording the sale transaction:
($ in millions)
Fair Value
Adjustment
Balance on 12/31/2018 ($6)
± Adjustment needed to update fair value ?
.
Exercise 12–19
Requirement 1
The investment would be accounted for at fair value through net income:
Purchase
Investment in AMC common shares……………………………… 480,000
Net income
No entry
Dividends
Adjusting entry
Need to move from a fair-value adjustment of $0 to $25,000:
Fair-Value
Adjustment
1/2/2018 0
Fair Value
Adjustment
Balance at purchase $0
± Adjustment needed to update fair value ?
25,000
Exercise 12–19 (concluded)
Requirement 2
The investment would be accounted for using the equity method:
Purchase
Cash …………………………………………………………………….
480,000
Net income
Dividends
Adjusting entry
No entry
Exercise 12–20
Purchase ($ in millions)
Net income
Dividends
Adjusting entry
No entry
Exercise 12–21
Requirement 1: Error discovered before the books are adjusted or closed in
2018.
The journal entry the company made is:
The journal entry the company should have made is:
Therefore, to get from what was done to what should have been done, the
following entry is needed:
Requirement 2: Error not discovered until early 2019.
Exercise 12–22
Purchase ($ in millions)
Investment in Carne Cosmetics shares………………………….. 68
Cash ……………………………………………………………………… 68
Net income
‡Calculations:
Investee Net Assets Difference
Net Assets Purchased Attributed to:
Cost $68
Goodwill:$12
Adjusting entry
Exercise 12–23
Requirement 1
Purchase ($ in millions)
Investment in Lake Construction shares………………………… 300
Cash ……………………………………………………………………… 300
Net income
‡ calculation:
Investee Net Assets Difference
Net Assets Purchased Attributed to:
Cost $300
Goodwill: $120
Exercise 12–23 (concluded)
Requirement 2
a. Investment in Lake Construction shares
__________________________________________
($ in millions)
Cost 300
Share of income 30
b. As investment revenue in the income statement.
c. Among investing activities in the statement of cash flows.
$300 million
[Cash dividends received ($6 million) also are reported—as part of
operating activities. If Cameron reports cash flows using the indirect