Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

MetlockCorp. is a medium-sized corporation specializing in quarrying stone for building construction. The company has long dominated the market, at one time achieving a 70%

MetlockCorp. is a medium-sized corporation specializing in quarrying 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,Metlockhas had a policy of investing idle cash in equity securities. In particular,Metlockhas made periodic investments in the company's principal supplier, Norton Industries. Although the firm currently owns 12% of the outstanding common stock of Norton Industries,Metlockdoes not have significant influence over the operations of Norton Industries.

Cheryl Thomas has recently joinedMetlockas assistant controller, and her first assignment is to prepare the 2017 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 aboutMetlock' pertinent accounts.

1.Metlockhas equity securities related to Delaney Motors and Patrick Electric. During 2017,Metlockpurchased91,000shares of Delaney Motors for $1,358,000; these shares currently have a fair value of $1,675,000.Metlock' investment in Patrick Electric has not been profitable; the company acquired54,000shares of Patrick in April 2017 at $20per share, a purchase that currently has a value of $717,000.2.Prior to 2017,Metlockinvested $22,284,000in Norton Industries and has not changed its holdings this year. This investment in Norton Industries was valued at $21,309,000on December 31, 2016.Metlock' 12% ownership of Norton Industries has a current fair value of $22,189,000on December 2017.

Part 1

Prepare the appropriate adjusting entries forMetlockas of December 31, 2017, to reflect the application of the "fair value" rule for the securities described above

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Payroll Accounting

Authors: Bernard J Bieg, Judith A Toland

29th Edition

1337673196, 9781337673198

More Books

Students also viewed these Accounting questions