Chapter 2:

Stock Investments –
Investor Accounting and
Reporting
‫ ﻣﺣﺎﺳﺑﺔ‬- ‫اﺳﺗﺛﻣﺎرات اﻷﺳﮭم‬
‫اﻟﻣﺳﺗﺛﻣرﯾن وإﻋداد اﻟﺗﻘﺎرﯾر‬

to accompany
Advanced Accounting, 11th edition
by Beams, Anthony, Bettinghaus, and Smith

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Stock Investments – Investor Accounting and
Reporting

1: LEVELS OF INFLUENCE OR
CONTROL
‫ ﻣﺴﺘﻮﯾﺎت اﻟﻨﻔﻮذ أو اﻟﺴﯿﻄﺮة‬:1
it w
g
t

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 Levels of Influence
‫لكية أسهم التصويت‬0 ‫ئوية‬0‫النسبة ا‬
Percent Ownership of Voting Stock
• <20% presumes lack of significant Them
influence è fair value (cost) method <20%
>50%
• 20% to 50% presumes significant Fair value
influence è equity method Consolidated(cost) method
• >50% presumes control è consolidated financial
financial statements statements

‫ ﯾﻔﺗرض ﻋدم وﺟود ﺗﺄﺛﯾر ﻛﺑﯾر طرﯾﻘﺔ اﻟﻘﯾﻣﺔ اﻟﻌﺎدﻟﺔ‬٪20>• ‫اﻟﻘواﺋم اﻟﻣﺎﻟﯾﺔ‬
(‫)اﻟﺗﻛﻠﻔﺔ‬ ‫اﻟﻣوﺣدة‬
Equity
‫ ﯾﻔﺗرض وﺟود ﺗﺄﺛﯾر ﻛﺑﯾر طرﯾﻘﺔ ﺣﻘوق‬٪50 ‫ إﻟﻰ‬٪20 • method 20-50%
‫اﻟﻣﻠﻛﯾﺔ‬
‫ ﯾﻔﺗرض اﻟﺳﯾطرة اﻟﺑﯾﺎﻧﺎت اﻟﻣﺎﻟﯾﺔ اﻟﻣوﺣدة‬٪50 < •

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Stock Investments – Investor Accounting and
Reporting

3A: FAIR VALUE/COST METHOD

‫ طﺮﯾﻘﺔ اﻟﺘﻜﻠﻔﺔ‬/ ‫ اﻟﻘﯿﻤﺔ اﻟﻌﺎدﻟﺔ‬:‫ أ‬3

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 Aw 46 li ds8eq46 61
1110.641
Fair Value (Cost) Method wi exam
74 1
658mi v.b 4eit I
FASB Statement No. 115 spa t.ws a

Pil buys 2,000 shares of Sud for $100,000 and does not have
significant influence over Sud. eel
E 115 ‫ﺑﯾﺎن ﻣﺟﻠس ﻣﻌﺎﯾﯾر اﻟﻣﺣﺎﺳﺑﺔ اﻟﻣﺎﻟﯾﺔ رﻗم‬
It Sud. ‫ دوﻻر وﻟﯾس ﻟﮫ ﺗﺄﺛﯾر ﻛﺑﯾر ﻋﻠﻰ‬100000 ‫ﻣﻘﺎﺑل‬Sud ‫ﺳﮭم ﻓﻲ‬Pil 2000 ‫ﯾﺷﺗري‬
Investment in Sud (+A) 100,000 is 15

Cash (-A) 100,000 oshi D

2,6
co
Pil receives $4,000 in dividends from Sud.
Sud ‫ دوﻻر ﻣن‬4000 ‫ﯾﺗﻠﻘﻰ ﺑﯾل أرﺑﺎًﺣﺎ ﺑﻘﯾﻣﺔ‬

Cash (+A) 4,000

Dividend income (R, +SE) 8,6 4,000
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Stock Investments – Investor Accounting and
Reporting

3B: EQUITY METHOD

‫ طﺮﯾﻘﺔ ﺣﻘﻮق اﻟﻤﻠﻜﯿﺔ‬:‫ ب‬3

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 8
Equity Method
At acquisition: Pil buys 2,000 shares of Sud for
$100,000. In www.bynwtu.am
.‫ دوﻻر‬100000 ‫ﻣﻘﺎﺑل‬Sud ‫ﺳﮭم ﻓﻲ‬Pil 2000 ‫ اﺷﺗرت‬:‫ﻋﻧد اﻻﺳﺗﺣواذ‬

Investment in Sud (+A) 100,000

Cash (-A) 100,000
Pil receives $4,000 in dividends from Sud.
Sud ‫ دوﻻر ﻣن‬4000 ‫ﯾﺗﻠﻘﻰ ﺑﯾل أرﺑﺎًﺣﺎ ﺑﻘﯾﻣﺔ‬

Cash (+A) 4,000

A
Investment in Sud (-A) 4,000
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 so
Equity Method, at Year-end
0 00
Pil determines that its share of Sud's income is $5,000.
.‫ دوﻻر‬5000 ‫ھو‬Sud ‫أن ﻧﺻﯾﺑﮫ ﻣن دﺧل‬Pil ‫ﯾﻘرر‬
Pr
Investment in Sud (+A) 5,000
Income from Sud (R, +SE) 5,000
:‫ستثمار في سود هو‬,‫الرصيد النهائي في ا‬
The ending balance in the Investment in Sud is:
$100,000 cost
- $4,000 dividends
Etta + $5,000 income

03h81m = $101,000

EIN
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Stock Investments – Investor Accounting and
Reporting

5: APPLYING THE EQUITY

METHOD
‫ ﺗﻄﺒﯿﻖ طﺮﯾﻘﺔ ﺣﻘﻮق اﻟﻤﻠﻜﯿﺔ‬:5

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 6
a Acquisition Cost > FV net assets, and
BUDE FV net assets > BV net assets
FUN
Payne acquires 30% of Sloan for $5,000. Sloan's identifiable net assets
(assets less liabilities) are: so
‫ أﺻول ﺳﻠون اﻟﺻﺎﻓﯾﺔ اﻟﺗﻲ ﯾﻣﻛن ﺗﺣدﯾدھﺎ )اﻷﺻول‬.‫ دوﻻر‬5000 ‫ ﻣن ﺳﻠون ﻣﻘﺎﺑل‬٪30 ‫ﺗﺳﺗﺣوذ ﺑﺎﯾن ﻋﻠﻰ‬
:‫ﻧﺎﻗص اﻟﺧﺻوم( ھﻲ‬
BV FV
Cash $1500 $1500 Cost $5000
Other current 30% Book value of net asset
asset 5500 5300
(12000*0.3) 3600
Inventory 3000 4000 was
Excess of cost over BV $1400
Plant, net 5000 8000
Total $15000 $18800
Goodwill = cost – 30%FV of net asset =
Liabilities $3000 $2800 O
5000 – 30% *16000 = 5000 – 4800 = 200
Capital stock 10000
GRetainedBu Assets FUE BU
earnings 2000 ibitit BV fu
Total $15000 Copyright ©2012 Pearson Education,
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3-10
 5000 301 160
‫القيمة الدفترية‬/‫مهمة التكلفة‬
I
200
Cost/Book Value Assignment
Investment in Sloan $5,000
Less 30% book value = 30%(12,000) 3,600
Excess of cost over book value $1,400

Assigned to: Amount Amortization a

Inventories 30%(+1,000) $300 1st year
Other curr. assets 30%(-200) (60) 1st year
Equipment 30%(+3,000) 900 20 years
paint Note payable 30%(+200) 60 5 years
libittigGoodwill (to balance) 200 None
Total $1,400

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 ‫ستحواذ على أسهم سلون‬.‫ا‬

Acquisition of Sloan Stock

At acquisition, Payne pays $2,000 cash and issues common stock with
F
a fair value of $3,000 and par value of $2,000. Payne also pays $50
to register the securities and $100 in consulting fees.
o
o
3000 ‫دوﻻر ﻧﻘدًا وﯾﺻدر أﺳﮭًﻣﺎ ﻋﺎدﯾﺔ ﺑﻘﯾﻣﺔ ﻋﺎدﻟﺔ ﺗﺑﻠﻎ‬Payne 2000 ‫ ﯾدﻓﻊ‬، ‫ﻋﻧد اﻻﺳﺗﺣواذ‬
‫ دوﻻًرا ﻟﺗﺳﺟﯾل اﻷوراق اﻟﻣﺎﻟﯾﺔ و‬50 ‫ﺿﺎ‬ً ‫أﯾ‬Payne ‫ ﯾدﻓﻊ‬.‫ دوﻻر‬2000 ‫دوﻻر وﻗﯾﻣﺔ اﺳﻣﯾﺔ‬
.‫ دوﻻر ﻓﻲ رﺳوم اﻻﺳﺗﺷﺎرات‬100
Dr
Investment in Sloan (+A) 5,000
Cash (-A) 2,000
Common stock, at par (+SE) 2,000
Additional paid in capital (+SE)
O
1,000
Additional paid in capital (-SE) 50
Investment expense (E, -SE) 100
Cash (-A) 150
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 ‫رباح والدخل‬+‫توزيعات ا‬

Dividends and Income

3t
Sloan pays dividends of $1000.
.‫ دوﻻر‬1000 ‫أرﺑﺎًﺣﺎ ﺑﻘﯾﻣﺔ‬Sloan ‫ﯾدﻓﻊ‬
SHE
Cash (+A)
Pr300 a
Investment in Sloan (-A) 300
Sloan reports net income of $3000.
Payne will recognize its share (30%) of Sloan's income
but will adjust it for amortization of the differences
between book and fair values.

.‫ دوﻻر‬3000 ‫ﯾﺑﻠﻎ ﺻﺎﻓﻲ دﺧل ﺳﻠون‬

‫وﻟﻛﻧﮭﺎ ﺳﺗﻌدﻟﮭﺎ‬Sloan ‫( ﻣن دﺧل‬٪30) ‫ﺑﺣﺻﺗﮭﺎ‬Payne ‫ﺳوف ﺗﻌﺗرف‬
.‫ﻻﺳﺗﮭﻼك اﻟﻔروق ﺑﯾن اﻟﻘﯾم اﻟدﻓﺗرﯾﺔ واﻟﻘﯾم اﻟﻌﺎدﻟﺔ‬
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 ‫ك ودخل ا'ستثمار‬.‫ا'سته‬
Amortization and Investment Income
Investment income is 30% of Sloan's net income – amortization of excess
‫ إطﻔﺎء اﻟﻔﺎﺋض‬- ‫ ﻣن ﺻﺎﻓﻲ دﺧل ﺳﻠون‬٪30 ‫دﺧل اﻻﺳﺗﺛﻣﺎر ھو‬
30%($3,000) – $297 = $603.

Initial 1st year Unamortized excess

Cost/book value differences:
amount amort. at year-end
Inventories $300 ($300) $0
Other current assets (60) 60 0
Equipment 900 (45) 855
Note payable 60 (12) 48
Goodwill 200 0 200
Total $1,400 ($297) $1,103

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 ‫الدخول والتوازن في نهاية العام‬

Year-End Entry & Balance

Record the investment income .‫ﺳﺟل دﺧل اﻻﺳﺗﺛﻣﺎر‬

Investment in Sloan (+A) 603

Income from Sloan (R, +SE) 603
The ending balance in the investment account is:
:‫اﻟرﺻﯾد اﻟﻧﮭﺎﺋﻲ ﻓﻲ ﺣﺳﺎب اﻻﺳﺗﺛﻣﺎر ھو‬

Cost – dividends + investment income

5,000 – 300 + 603

= 5,303

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