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Kaplan AC 450 Unit 1 Problem 1-25

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Question;Problem 1-25 [LO1, LO3, LO7]On January 1, 2012, Allan acquires 15 percent of Bellevue?s outstanding common stock for $88,450. Allan classifies the investment as an available-for-sale security and records any unrealized holding gains or losses directly in owners? equity. On January 1, 2013, Allan buys an additional 10 percent of Bellevue for $59,990, providing Allan the ability to significantly influence Bellevue?s decisions. During the next two years, the following information is available for Bellevue: Income Dividends Common StockFair Value (12/31) 2012 $ 174,000 $ 74,000 $ 612,000 2013 210,400 92,200 666,600 ________________________________________In each purchase, Allan attributes any excess of cost over book value to Bellevue?s franchise agreements that had a remaining life of 10 years at January 1, 2012. Also at January 1, 2012, Bellevue reports a net book value of $373,000.Assume Allan applies the equity method to its Investment in Bellevue account:a-1. On Allan?s December 31, 2013, balance sheet, what amount is reported for the Investment in Bellevue account? Investment in Bellevue $ a-2. What amount of equity income should Allan report for 2013? Equity income $ a-3. Prepare the January 1, 2013, journal entry to retrospectively adjust the Investment in Bellevue account to the equity method.Assume Allan elects the fair-value reporting option for its investment in Bellevue:b-1. On Allan?s December 31, 2013, balance sheet, what amount is reported for the Investment in Bellevue account? Investment in Bellevue $ b-2. What amount of income from its investment in Bellevue should Allan report for 2013? Reported income $

 

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