07 Jul Accounting Exercises
ill in the dollar changes caused in the Investment account and Dividend Revenue or Investment Revenue account by each of the following transactions, assuming Crane Company uses (a) the fair value method and (b) the equity method for accounting for its investments in Hudson Company. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Do not leave any answer field blank. Enter 0 for amounts.)
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(a) Fair Value Method |
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(b) Equity Method |
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Transaction |
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Investment Account |
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Dividend Revenue |
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Investment Account |
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Investment Revenue |
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1. |
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At the beginning of Year 1, Crane bought 25% of Hudson’s common stock at its book value. Total book value of all Hudson’s common stock was $850,000 on this date. |
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2. |
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During Year 1, Hudson reported $54,000 of net income and paid $27,000 of dividends. |
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3. |
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During Year 2, Hudson reported $31,500 of net income and paid $20,000 of dividends. |
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4. |
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During Year 3, Hudson reported a net loss of $12,000 and paid $3,800 of dividends. |
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5. |
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Indicate the Year 3 ending balance in the Investment account, and cumulative totals for Years 1, 2, and 3 for dividend revenue and investment revenue. |
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