Yes Men, Inc. purchased 10,000 common shares of No Men Corp. common stock at $10
ID: 2530634 • Letter: Y
Question
Yes Men, Inc. purchased 10,000 common shares of No Men Corp. common stock at $10 per share on
January 1, 2017 with cash. The security pays a $2.00 per share cash dividend at the end of each year. At
December 31, 2017, the shares had a fair value of $12 per share and at the end of 2018 the shares had a
fair value of $8 per share.
Required:
1. Prepare the journal entries to record the purchase of the shares and the receipt of the dividends
received at the end of 2017 and 2018.
2. Assume Yes Men sold half of the shares for $9 per share on June 15, 2019. Prepare the journal
entry to record the sale of the shares assuming the shares were accounted for as a trading security,
and as an available-for-sale security.
3. Complete the following schedule showing what would have been reported on the 2017 financial
statements assuming the investment was classified as a Trading Security (TS), an Available-For-
Sale security (AFS), and an Equity Method security (EM). For the equity method, assume No
Men Corp. earned $100,000 in 2017 and Yes Men Inc. own 50% of the outstanding shares.
TS AFS EM
Balance Sheet
Income Statement
Statement of Comprehensive Income
Statement of Cash Flow
Operating Activities (direct)
Operating Activities (indirect)
Investing Activities
Explanation / Answer
01.01.17 Investment in No man Corp A/c Dr 100000 To Cash 100000 31.03.2017 Cash A/C Dr 20000 To Dividend Income 20000 31.03.2017 Investment in No man Corp A/C Dr 20000 To P & L 20000 31.03.2018 Cash A/C Dr 20000 To Dividend Income 20000 31.03.2018 P &L A/c Dr 40000 To Investment in No Man corp a/c 40000 15.06.2019 Bank a/c Dr 45000 To Investment a/c 40000 To P & L A/c 5000 TS AFS Balance Sheet 1. Current Assets 100,000 2. Investments 100,000 Income Statement 2. Direct Income 20000 3. Dividend Income 20000 4. Fair Value Income 20000 20000 5. Purchase of Investment -100000 Statement of Comprehensive Income Statement of Cash Flow Operating Activities (direct) 1. Dividend Income 20000 -20000 Operating Activities (indirect) Investing Activities 1. Purchase of Investment -100000 2. Dividend Income 20000
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