高级财务会计PPT2.pptVIP

* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * The Equity Method Purchases of additional shares If the equity method was being used to account for shares already held, the acquisition involves adding the cost of the new shares to the investment account and applying the equity method from the date of acquisition forward New and old investments in the same stock are combined for financial reporting purposes Purchases of Additional Shares ABC Company purchases 20 percent of XYZ’s common stock on January 2, 20X1, and another 10 percent on July 1, 20X1, and the stock purchases are at book value. Income, January 2 to June 30: $25,000 x .20 $ 5,000 Income, July 1 to December 31: $35,000 x .30 10,500 Income from Investment, 20X1 $15,500 Investment in XYZ Stock 15,500 Income from Investee 15,500 Purchases of Additional Shares XYZ declares and pays a $10,000 dividend on January 15 and again on July 15. January 15 dividend: $10,000 x .20 $2,000 July 15 dividend: $10,000 x .30 3,000 Reduction in Investment, 20X1 $5,000 Cash 2,000 Investment in XYZ Stock 2,000 January 15, 20X1 Cash 3,000 Investment in XYZ Stock 3,000 July 15, 20X1 Purchases of Additional Shares Aron Corporation purchases 15 percent of Zenon Company’s common stock on January 2, 20X1 and another 10 percent on January 2, 20X4. Aron switches to the equity method on January 2, 20X4. Originally under Restated under Year Net Income Dividends Cost Equity Zenon Investment Income Reported by Aron 20X1 $15,000 $10,000 $1,500 $2,250 20X2 18,000 10,000 1,500 2,700 20X3 22,000 10,000 1,500 3,300 $55,000 $30,000 $4,500 $8,250 The investment account and retained earnings of Aaron are restated as if the equity method had been applied from the date of the ori