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On January 1, 2012, Allan acquires 15 percent of B...

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On January 1, 2012, Allan acquires 15 percent of Bellevue?s outstanding common stock for $62,000. 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 $43,800, 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 Stock Fair Value (12/31) 2012 $ 80,000 $30,000 $438,000 2013 100,000 40,000 468,000 -------------------------------------------------------------------------------- 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, Bellevue reports a net book value of $280,000. 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? (a-2) What amount of equity income should Allan report for 2013? (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? (b-2) What amount of income from its investment in Bellevue should Allan report for 2013?

 

Paper#8396 | Written in 18-Jul-2015

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