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Assessing Financial Statement Effects of Passive and Equity Method Investments
On January 1, 2018 Ball Corporation purchased shares of Leftwich Company common stock.
(a) Assume that the stock acquired by Ball represents 15% of Leftwich's voting stock and that Ball has no influence over Leftwich's business decisions. Use the financial statement effects template (with amounts and accounts) to record the following transactions:
(1) Ball purchased 5,000 common shares of Leftwich at $15 cash per share.
(2) Leftwich reported annual net income of $40,000.
(3) Ball received a cash dividend of $1.10 per common share from Leftwich.
(4) Year-end market price of Leftwich common stock is $19 per share.
Use negative signs with answers when appropriate.

Sagot :

The financial statement effects template  is given as :

It is a double-entry concept that helps us understand each transaction and its impact on the company's financial statements.

                                 Balance sheet

Transaction cash asset + non-cash = liability + contributed capital +                 earned capital

1  -75000+ 75000 = 0 +0+0

2  0+ 40000 = 0+0+ 40000

3   5500 +0 = 0+0+ 5500

4  0 +20000 = 0+ 0 + 20000

                                Income statement

Transaction  Revenue - Expense = Net Income

1   0 -0 = 0

2   40000 - 0 = 40000

3  5500 - 0 = 5500

4  20000 +0 = 20000

From the above financial statement effect template, we can understand the company's business decisions clearly.

To know more about Financial statements effect template,

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