(Fair V alue and Equity Methods) Brooks Corp. is a medium-sized corporation specializing in quar-
rying stone for building construction. The company has long dominated the market, at one time achieving a 70% market penetration. During prosperous years, the company’s profits, coupled with a conservative dividend policy, resulted in funds available for outside investment. Over the years, Brooks has had a policy of investing idle cash in equity securities. In particular, Brooks has made periodic investments in the com-
pany’s principal supplier, Norton Industries. Although the firm currently owns 12% of the outstanding common stock of Norton Industries, Brooks does not have significant influence over the operations of Norton Industries.
Cheryl Thomas has recently joined Brooks as assistant controller, and her first assignment is to prepare the 2014 year-end adjusting entries for the accounts that are valued by the “fair value” rule for financial reporting purposes. Thomas has gathered the following information about Brooks’ pertinent accounts.
1. Brooks has trading securities related to Delaney Motors and Patrick Electric. During this fiscal year, Brooks purchased 100,000 shares of Delaney Motors for $1,400,000; these shares currently have a fair value of $1,600,000. Brooks’ investment in Patrick Electric has not been profitable; the company acquired 50,000 shares of Patrick in April 2014 at $20 per share, a purchase that currently has a value of $720,000.
2. Prior to 2014, Brooks invested $22,500,000 in Norton Industries and has not changed its holdings this year. This investment in Norton Industries was valued at $21,500,000 on December 31, 2013. Brooks’ 12% ownership of Norton Industries has a current fair value of $22,225,000.
(a) Prepare the appropriate adjusting entries for Brooks as of December 31, 2014, to reflect the applica- tion of the “fair value” rule for both classes of securities described above.
(b) For both classes of securities presented above, describe how the results of the valuation adjustments made in (a) would be reflected in the body of and notes to Brooks’ 2014 financial statements.
(c) P r epa r e the entries for the Norton investment, assuming that B r ooks owns 25% of Norton’s sha r es.
Norton r eported income of $500,000 in 2014 and paid cash dividends of $100,000.
Southern Production Company has 100 labor-hours available. Thereis no limit on machine-hours. Southern can sell all of B it wants,but it can only sell 45 units and 20 uni...May 31 2021
1. Find V0 in the circuit in Fig. P4.35.2. Determine the expression for the output voltage, v0 of the inverting-summer circuit shown in Fig. P4.36.May 24 2020
The operating cash flow in year 1 is (Use the following information): A proposed power-saving equipment has a purchase price of $580,000. The equipment will be used in a ...Aug 04 2021
Your dream has come true: you have just been offered an excellent position. Although you accepted the position on the phone, you want to send a formal acceptance e-mail o...Aug 23 2021
What is the difference between commodity money and fiat money?May 09 2021
Consider the dilution of 25.00 ml of an aqueous solution of potassium phosphate to prepare 120.00 ml of 0.0625 M solution of potassium phosphate. What is the number of mo...May 16 2021
The income statement for Delta-tec Inc. for the year ended December 31, 2016, was as follows:Delta-tec Inc.Income Statement (selected items)For the Year Ended December 31...Jun 16 2020
Direct costing may be used fora. internal reporting purposes.b. external financial reporting purposes.c. income tax reporting purposes.d. all of the above.May 16 2021
what is the molar mass of hemoglobin?Jun 28 2021
Under what circumstances would the Income Statement and Balance Sheet columns on a work sheet balance when they are initially totaled?Apr 08 2020