accounting for investment in fair value method

1 purchase on investment 1 j1 2010

investment afs
cash
2 dec 31 2010
2 dividend
cash
Dividend income
3 Dec 31 2010
3 change in investment
when gain
investment 2 Dec 31 2011
investment income
when loss
investment loss 3 Dec 31 2011
investment

2 Dec 31 2012

3 Dec 31 2012

fair method
 solution
investment 200,000
cash 200,000

cash 10,000
dividend income 10,000

investment 35,000
investment income 35,000

cash 20,000
Dividend income 20,000

Investment 20,000
investment Income 20,000

cash 40,000
dividend income 40,000
investment 65,000
investment income 65,000
1 fair value method 2 equity method
2010.2011
1 purchase 1 investment in small co.
investment 800,000
cash 800,000

2 dividend 2
cash 2,000
dividend incom 2,000
3
3 change investment
investment 40,000
investment income 40,000

2011
2 cash 4,000
investment 4,000
3 investment 90,000
investment income 90,000

retrospective adjustment

jan 1 2012 investment PPA 12000

investment income 12000
investment income 13,000
investment afs 13,000

dec 31 2012 Investment in small.co 52,000

equity in investee income

cash 20,000
investment in small.co 20,000
2 equity method

nvestment in small co. 800,000

cash 800,000

investment 7,000
equity in investee income 7,000

cash 2,000
investement in smll.co
2,000
2011

2 investment 11,000
equity investee inc 11,000

3 cash 4,000
investment in small.co 4,000

52,000
reprting investee income from sources other than continuing operation

when gain investement>equity

investment (net income*% owns) equity>investment
equity investee income (Income from contuniue oper
extraordinary income (extraordinay income*% own
loss

investement
extraordinary loss
equity investee income

example 1
given investment(200,000*
net income= 200,000 Extraordinary loss(50
income from contuniung operation= 250,000
extradinay loss= 50,000
% owns= 40%
operation

investement>equity gain
equity>investment loss
e from contuniue operation*% owns)
rdinay income*% owns)

solution

investment(200,000*40%) 80,000
Extraordinary loss(50,000*40% 20,000
Equity in investee income 100,000
 Reporting the sale of an equity Investment

1 Update income
investment in bottom co. 28,000
equity in investee income 28,000

2 Update dividend
cash 12,000
Investment in bott co. 12,000

3 Sale on investment
When Gain
Cash 110,000
Investment 84,000
Gain on sale of investment 26,000

When Loss
Cash
Loss on sale investment
Investtment

at breakeven

cash
investment
 Investment
Dr Cr
320,000 12,000
28,000
Total 348,000 12,000
total 336,000 84000
252,000

336000
0.25