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Kaplan AC 450 Advanced Accounting Unit 1 Problem 1-25

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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;IncomeDividendsCommon Stock;Fair Value (12/31);2012$174,000$74,000$612,000;2013210,40092,200666,600;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$;b-2.What amount of income from its investment in Bellevue should Allan report for 2013?;Reported income$

 

Paper#80063 | Written in 18-Jul-2015

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