Question 29 (20 points) On January 1, 2019, ABC Corp. bought 25% of the outstanding common shares of XYZ Corp. for $50,000. On the date of purchase, the carrying amount of XYZ Corps net assets was $150,000. Any excess of the purchase cost paid by ABC Corp. over ABC Corp.'s share of XYZ Corp's carrying amount is attributable to property, plant, and equipment that has a 5-year useful life and zero residual value and is depreciated using the straight-line method. For the year ended December 31, 2019, XYZ Corp. earned net income and comprehensive income of $25,000, and declared and paid dividends of $15,000. The fair value of ABC Corp.s investment in XYZ Corp. was $55,000 at the end of 2019. For the year ended December 31, 2020, XYZ Corp. incurred a net loss and comprehensive loss of $5,000 and did not declare or pay dividends. On December 31, 2020, ABC Corp. sold its 25% investment in XYZ Corp. for $45,000. Both ABC Corp. and XYZ Corp. have a December 31 fiscal year-end. Four independent sets of questions follow, each assuming a different method that ABC Corp. uses to account for its investment in XYZ Corp. The four methods are Cost, FV-NI, FV-OCI, and Equity method. Answer the following questions from the perspective of ABC Corp. and ABC Corps investment in XYZ Corp. Assume the investment is a less than significant influence investment for the Cost, FV-NI, and FV-OCl methods. Assume the investment is a significant influence investment for the Equity method. Assume that the investment is not impaired in any year for any method. also known as profit or loss). investment or the cost, V-NI, and HV-OC methods. Assume the investment is a significant influence investment for the Equity method. Assume that the investment is not impaired in any year for any method. (Note: Net income is also known as profit or loss). (Note: When asked, indicate clearly whether the amount is an increase or decrease, gain or loss, and DR or CR). Assuming the cost method is used, find the following amounts. a. Increase (decrease) in carrying value of investment directly as a result of 2019 net income earned by XYZ. b. Increase (decrease) in ABC's 2019 net income directly as a result of 2019 dividend declared and paid by XYZ. c. Increase (decrease) in ABC's 2019 net income directly as a result of changes in fair value of investment for the year ended Dec. 31, 2019. d. Carrying value of investment on Dec. 31, 2019. e. Gain (loss) recognized in ABC's 2020 net income as a result of sale of investment on Dec. 31, 2020 (Assuming no recycling where relevant). Assuming the FV-NI method is used, find the following amounts. . Increase (decrease) in carrying value of investment directly as a result of 2019 net 3 income earned by XYZ. 8. Increase (decrease) in ABC's 2019 net income directly as a result of 2019 dividend declared and paid by XYZ. h. Increase (decrease) in ABC's 2019 net income directly as a result of changes in fair value of investment for the year ended Dec 31, 2019. i. Carrying value of investment on Dec. 31, 2019. Assuming the FV-OCI method is used, find the following amounts. j. Increase (decrease) in ABC's 2019 net income directly as a result of 2019 dividend declared and paid by XYZ. k. Increase (decrease) in ABC's 2019 net income directly as a result of changes in fair value of investment for the year ended Dec. 31, 2019. 1. Carrying value of investment on Dec. 31, 2019. m. Gain (loss) recognized in ABC's 2020 net income as a result of sale of investment on Dec. 31, 2020 (Assuming no recycling where relevant). n. Assuming no recycling, the amount DR (CR) to OCI as a result of sale of investment on Dec. 31, 2020. o. Assuming no recycling, the amount DR (CR) to AOCI as a result of sale of investment on Dec. 31, 2020. o. Assuming no recycling, the amount DR (CR) to AOCI as a result of sale of investment on Dec 31, 2020. Assuming the equity method is used, find the following amounts. p. Carrying value of investment on January 1, 2019 immediately after purchase. q. Increase (decrease) in carrying value of investment directly as a result of 2019 net income earned by XYZ. r. Increase (decrease) in ABC's 2019 net income directly as a result of 2019 dividend declared and paid by XYZ. s. Increase (decrease) in ABC's 2019 net income directly as a result of changes in fair value of investment for the year ended Dec. 31, 2019. led Dec. 31. 2 t. Gain (loss) recognized in ABC's 2020 net income as a result of sale of investment on Dec. 31, 2020 (Assuming no recycling where relevant)
