Assignment
1. Classifying Disney Properties. 1st Post Due by Day 3. Watch the "Disney Buys Star Wars" video and review the Walt Disney 2013 Annual Report. In your post, answer the following:
a. What did Disney get with the 4 billion acquisition and how does Forbes Staff, Dorothy Pomerantz, classify Star Wars as a property in the video?
b. What percent of the following companies does the Walt Disney Company own and how does the Walt Disney Company account for the following investments?
- Lucas Film
- Hulu
- AETN
- UTV
- Seven TV
c. How much did the Walt Disney Company increase the investment account during the year due to recognizing investee income? (Cash flow statement)
d. How much did the Walt Disney Company decrease the investment account during the year due to receiving dividends from equity investments? (Cash flow statement)
e. What effect do the two above amounts have on the cash flow statement and why are the amounts added or subtracted?
2. Goodwill. Based on this week's reading and weekly lecture:
- Explain how Goodwill is computed.
- Does the fair value of assets versus the book value have any effect on the recognition of goodwill? Provide an example with the associated journal entry.
- Will the amount of Goodwill recognized change based upon the percent of the company purchased. Can the amount be the same?
- In a percent acquisition, what would cause the amount of Goodwill to be non-proportional? Provide examples to support your answer.
- Discuss the differences between goodwill and a bargain purchase. Provide an example to support your conclusion.
- Discuss the treatment of goodwill that exists on a subsidiary's books.
3. Cost Method Versus the Equity Method. 1 st Post Due by Day 3. Based on this weeks reading and weekly lecture, explain the difference between the cost method, the equity method, and the fair value method. Provide examples to support your explanations.
4. Accounting for Investments. 1 st Post Due by Day 3. Gant Company purchased 20 percent of the outstanding shares of Temp Company for $70,000 on January 1, 20X6. The following results are reported for Temp Company:
20X6 20X7 20X8
Net income 40,000 35,000 60,000
Dividends paid 15,000 30,000 20,000
Fair value of shares held by grant
January 1 70,000 89,000 86,000
December 89,000 86,000 97,000
Determine the amounts reported by Gant as income from its investment in Temp for each year and the balance in Gant's investment in Temp at the end of each year, assuming Gant uses the following methods in accounting for its investment in Temp:
Cost Method
20X6 20X7 20X8
Dividend Income
Balance in investment
Equity Method
20X6 20X7 20X8
Dividend Income
Balance in investment
Fair value Method
20X6 20X7 20X8
Dividend Income
Balance in Investment
REQUIRED BOOK
Baker, R. E., Christensen, T. E. & Cottrell, D. M. (2012). Essentials of advanced financial accounting. New York, NY: McGraw-Hill Irwin.