UWorld ROGER CPA Review Johnson, an investor in Acme Co., asked Smith, CPA for advice on the propriety of Acme's financial reporting for two of its investments. Smith obtained the following information related to the investments from Acme's December 31, Year 7, financial statements: 20% ownership interest in Kern Co., represented by 200,000 shares of outstanding common stock purchased on January 2, Year 7, for $600,000. Acquired debt securities from Wand Co., on January 2, Year 7, for $300,000 with the intent to hold them for a short period of time. On January 2, Year 7, the carrying values of the acquired investments equaled their purchase price. Kern reported earnings of $400,000 for the year ended December 31, Year 7, and declared and paid dividends of $100,000 during Year 7. Acme received $52,000 in interest payments from Wand Co. during the year. On December 31, Year 7, Kern's common stock was trading over-the counter at $18 per share. The fair value of the debt securities from Wand was $360,000. The investment in Kern is accounted for using the equity method and the debt securities are accounted for as trading securities. Smith recalculated the amounts reported in Acme's December 31, Year 7, financial statements, and determined that they were correct. Stressing that the information available in the financial statements was limited, Smith advised Johnson that, assuming Acme properly applied generally accepted accounting principles, Acme may have appropriately used two different methods to account for its investments. Acme did not elect the fair value option regarding its financial instruments. Required: Complete the schedule indicating the amounts Acme should report for the two investments in its December 31, Year 7, balance sheet, statement of income, and other comprehensive income. Ignore income taxes. (Leave no answer bladk - enter O for cells that do not have an amount to enter.) Carrying Value on Balance Sheet Kern investment on B/S Answers Trading securities on B/S Income on Income Statement (I/S) Emm Vam innstment < Prev 11 of 16 Next >