Chapter 9
Investments
472
Analysis
When Quentin Company’s accountant noticed the trading price change of Hallow Company
on December 31, 2016, the CEO of Quentin Company suggested to make a year-end fair value
adjustment to “reflect the true market value of the investment.” As the Hallow Company’s
accountant, explain if fair value adjustment is needed. Prepare journal entries if necessary.
AP-14B (
3
)
Mill Inc. acquired 30% of the 800,000 outstanding common shares from Nixy Company and
paid $3,300,000 in cash on January 1, 2016. On July 1, 2016, Nixy Company reported a profit of
$900,000 on its annual financial statements, ending June 30, 2016. Nixy paid cash dividends
of $0.25 per share, on July 30, 2016. Mill Company uses ASPE standards and decided to use
the cost method to account for this investment from the beginning. If the equity method was
used instead, how much would it affect the ending balance of the investment account at its
year-end of December 31, 2016?
