04 Jun Question Problem 1: Follow these directions to set up QuickBooks™ 1. Load QuickBooks™ CD; enter the information on t
Question
Problem 1:
Follow these directions to set up QuickBooks™
1. Load QuickBooks™ CD; enter the information on the disc sleeve when asked license and product number.
2. Once QuickBooks™ is loaded, reboot your computer. Once rebooted, click icon entitled QuickBooks™, go through the agreement question(s), and then select “create a new company” and “express set-up”.
3.Enter the company name, “Investor Corp.” with your address and phone number of your choice. The industry is financial services. The corporation will have a tax ID of 99-1234567, with no employees. Use your own address and email, and then you can create a company and select start.
4. Select home on the left side of the screen and the icons will appear. To start, go to the top panel and select account > general ledger.
5. Create two cash accounts: Cash – Cost Method and Cash – Equity Method. cash account, classify as bank with the description written in saying “cash to buy Investee Corporation”.
6.Go to the home screen by selecting the left side tab to go to the top panel.
7.Select account > general ledger and deposit $1 million into the cash account as a debit to cash and a credit to capital stock. cost method, assign a date of 1/1/2014 deposit and equity method, assign a date of 1/1/2016 deposit of the cash. 8.Then return to the home menu. Select chart of accounts and then add new accounts assets: one called Investee Corp – Cost Method and the other Investee Corp – Equity Method (classify both as other assets).
9.Again return to home. Select chart of accounts and then add new accounts, one called Dividend – Cost Method and the other called Dividend – Equity Method (classify both as according to the textbook definitions of each.)
10.Lastly, return to home. Select chart of accounts and then add new accounts, one called Gain – Cost Method and the other Gain – Equity Method (both are income accounts).
Important to remember:
-Do not forget to click on ‘save and close’ after you input and file.
-Backup your company information many times as you work.
-Always check to be sure your input dates are the end of the year, especially if you cannot find an input.
To start, go to the top panel and select account general ledger to complete the exercise below the equity method and the cost method of accounting long-term investment. Enter your journal entries from the top panel and select account, general ledger. To submit method, select from the top ribbon reports > accounting and taxes > and then transaction detail by account. (Be sure the dates account are from 1/1/14 to 12/31/17). Export to Excel and then submit the details in two separate Excel spreadsheets two methods. Be sure to check your dates when both entering the transaction and exporting the information to Excel. Label the first Excel file: Mod 3-Option 1-Investee Corp.
Additionally, cost method use the earlier year. equity method, use the later year.
2014/2016
Jan 1 – Investor Corporation purchased 8,000 shares (20%) of Investee Company’s outstanding stock at a cost of $150,000.
May 31-Investee Company declared and paid a cash dividend of $1.50 per share.
Dec 31- Investee Company announced that its net income year was $100,000.
2015/2017
Oct 1- Investee Company declared and paid a cash dividend of $1.00 per share.
Dec 21-Investee Company announced that its net income year was $80,000.
Dec.31-Investor Corporation sold all of its shares of Investee Company for $178,000 cash.
Required:
1. Cost method: Prepare journal entries 2014 and 2015 in QuickBooks™ on Investor Corporation’s books using the cost method, which assumes that investor does not have significant influence over Investee (, another corporation owns 70% of Investee Company’s stock).
2. Equity method: Prepare in QuickBooks™ the journal entries 2016 to 2017 on Investor Corporation’s books using the equity method, which assumes that Investor has significant influence over Investee Company.
3. Under the equity method Excel submission: Write a brief report between 200 and 300 words in length outlining your recommendations to senior management based on the information presented here.
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