Reference no: EM133087224
Question - Global Inc. (Global) is a public company with December 31 year end. For investment accounted for under Fair Value - Net Income method, Global follows the policy of not reporting interest income separately from investment income. Following transactions related to Global occurred during 2016.
On January 1, 2016, Global paid $500,000 for 10,000 common shares of Universal Technologies Inc. (Universal). Universal has 25,000 common shares issued and outstanding with the carrying value of $1,250,000.Global is a major supplier of raw material to Universal and buy more than 10% of its finished goods. Global appointed 4 out of 10 members of Universal board of directors. During 2016, Global received a cash dividend of $10,000. Universal has policy of paying out 50% of its net income in dividends each year. On December 31, 2016, the fair value of each common share of Universal was $52.50. On March 15, 2017, Global sold 100% of its investment in Universal for $51.40 per share.
On July 1, 2016, Global purchased $80,000 of five year, 9% bonds for $74,086 to yield 11%. Bond pays interest each June 30 and December 31. At December 31, 2016, bond has a fair value of 76,500. On March 30, 2017, Global sold the bond for $76,000 plus accrued interest.
Required -
(a) Assuming Global use equity method to account for its investment in Universal, prepare all journal entries for 2016.
(b) Assuming Global accounts the investment in Universal under Fair Value - Other Comprehensive Income method without recycling, prepare all journal entries for 2016 and journal entry for sale of shares in 2017.
(c) Assuming Global accounts for investment in bonds under Held to Maturity method, prepare all the journal entries for 2016 and journal entry for the sale of bond in 2017.
(d) Assuming Global accounts for investment in bonds under Fair Value - Net Income method, prepare all the journal entries for 2016 and journal entry for the sale of bond in 2017.
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