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How much would the accounting approach differ

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Reference no: EM132914059

Achen Company acquired 30% of the stock Rheinland Minerals Company. Achen acquired this investment for purposes of being able to exert significant influence over the strategic plans and operations of Rheinland. Following are the events pertaining to this investment:

Sept 1 Purchased 150,000 shares of Rheinland for P 17 per share.

Sept 30 The fair value of Rheinland's stock for P 27 per share and the company reported September income of P 330,000.

Oct 15 The fair value of Rheinland's stock was P 32 per share, and the company declared and paid a dividend of P 1.25 per share.

Oct 31 The fair value of Rheinland's stock was P 28 per share, and the company reported October income of P 270,000.

Requirement: Create a working paper to document your audit. Make sure that the following questions are answered by your audit working paper:

Problem a) What method should be used to account for this investment?

Problem b) Prepare journal entries to account for the activity pertaining to the investment in Rheinland Minerals.

Problem c) If the investment in Rheinland Minerals was insufficient to allow Achen to exert significant influence, how much would the accounting approach differ?

Reference no: EM132914059

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