Chapter 12 E12-7 Loreal-Amerfcan Corporation purchased several marketable securi
ID: 2367444 • Letter: C
Question
Chapter 12 E12-7 Loreal-Amerfcan Corporation purchased several marketable securities during 2013. At December 31, 2013, the company had the investments in common stock listed below. None was held at the last reporting date, December 31, 2012, and all are considered securities available-for-sale. Cost Fair value Unrealized holding Gain(Loss) Shprt Term: Blair Inc 480,000 405,000 -75,000 ANC Corporation 450,000 480,000 30,000 Totals: 930,000 885,000 -45,000 Long term: Drake Corporation 480,000 560,000 80,000 Aaron Industries 720,000 660,000 (60,000) Totals: 1,200,000 1,220,000 20,000 Required: 1) Prepare the appropriate adjusting entry at December 31, 2013. 2) What amounts would be reported in the income statement at December 31, 2013, as a result of the adjusting entry? Thanks much.Explanation / Answer
On January 1, 2011, Cameron Inc. bought 20% of the outstanding common stock of Lake Construction Company for $300 million cash. At the date of acquisition of the stock, Lake's net assets had a fair value of $900 million. Their book value was $800 million. The difference was attributable to the fair value of Lake's buildings and its land exceeding book value, each accounting for one-half of the difference. Lake's net income for the year ended December 31, 2011, was $150 million. During 2011, Lake declared and paid cash dividends of $30 million. The buildings have a remaining life of 10 years. Required: 1. Prepare all appropriate journal entries related to the investment during 2011, assuming Cameron accounts for this investment by the equity method. 2. Determine the amounts to be reported by Cameron: a. As an investment in Cameron's 2011 balance sheet. b. As investment revenue in the income statement. c. Among investing activities in the statement of cash flows.
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