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Advanced accounting




Question;nvestments. Clarence?s Chief Financial Officer loves to invest, so he uses Clarence?s money toinvest in shares of other companies? stock. On 1/1/2007, Clarence purchased 1,000 shares ofLlama Corporation. During fiscal 2008, Clarence purchased 1,000 shares of Goat Corporation.The Llama shares were purchased for $10.50 per share and the Goat shares were purchased for$7.20 per share.At the end of fiscal 2007, the fair market value of Llama was $10.90/share. At the end of fiscal2008, the shares of Llama and Goat were worth $10.50 and $7.20 per share, respectively. LlamaCorporation declared and paid cash dividends of $0.75 per share in both 2007 and 2008, GoatCorporation declared and paid a cash dividend of $0.50 per share in fiscal 2008.Clarence?s share of Llama?s stockholders? equity at the date of purchase was 10,000, with theentire difference between cost and book value attributable to equipment with a remaining usefullife of five years (Llama uses straight-line for all depreciation and amortization). Llama?s totalnet income was $3,000 in 2007 and $3,500 in 2008.2. HW4 - 8 pointsa. What is the effect of the investment in Llama Company on net incomeand comprehensive income in fiscal 2008 under each of the followingclassifications for investments. If not zero, you must provide an amountand a sign (+ for increase income, - for decrease income).Available for Sale Trading________________________________________________________________________Effect on netincome___________________________________________________________________Effect oncomprehensiveincomeb. If the equity method were used to account for the investment in Llama,what is the balance in the investment in Llama account as of 12/31/07(assume 30% ownership for this question)?c. If the investment in Goat is accounted for as an available-for-salesecurity, what is its value in the assets section of the balance sheet as of12/31/08?d. If the investment in Goat is accounted for as a trading security, what isits value in the assets section of the balance sheet as of 12/31/08?Additional RequirementsMin Pages: 1Level of Detail: Show all workOther Requirements: This problem has four parts. Please help with this.


Paper#45054 | Written in 18-Jul-2015

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