Equity and Cost Methods in Accounting Using QuickBooks™ to Record the Transactions

Assignment Choice #1: Equity and Cost Methods in Accounting Using QuickBooks™ to Record the Transactions

Register for QuickBooks Online Simple Start 2015: https://qbo.intuit.com For PC and Mac.

You may have to start with a free trial with a credit card and cancel directly after this module submission.

Once QuickBooks™ is loaded, you may have to reboot your computer.

  1. Setting up company:

Go to Home page, select the widget to the direct top right of the word ‘help’ and select on the left side ‘settings’, then company setting.

For each edit, hit the pen picture on the right hand side of each section. Enter the company name, Shea Corporation. Enter information as indicated below:

Company address: Orchard Road

City:  Greenwood Village, CO 80111

State: CO

ZIP code: 80111

Phone Number: 999.999.9999

Choose Accrual Basis

Go to advanced setting and be sure everything is turned on except the accounting setting for the closing of the books

X out of this screen, which returns you to the home page

TIPS:

  1. In the home page, go to the top right hand corner, to the right of the name of the company, click the gear symbol, which is the main link for everything you need for changes.
  2. From 2014 to end of 2015, all account names have the words “using the cost method” in them. From 2016 to 2017, all account names have the words “using the equity method” in them.
  3. For doing the journal entries below: Go to top panel, in the middle of the top of the screen, where there is a plus sign (+) and select journal entries found in the other section.
  4. It is up to you to create the correct accounts, with the proper journal entriesImportant to remember:
    • Do not forget to click on ‘save and new’ after you input and file.
    • Backup your company information many times as you work. To do this, click the button at the bottom of each screen called: save and new
    • Always check to be sure your input dates are correct. Transaction input date are on the top left side above the journal entry
    • Always best to record terms within the journal entry in the extra line provided to the right of A/R or A/P

2. Prepare journal entries. Be sure all dates agree with the problem and are not today’s date

Cost method

Year 2014  
Jan 1 Investor corporations purchased 8,000 shares (20% of investee company’s outstanding stock)

at a cost of $ 150,000.

May 31 Investee company declared and paid a cash dividends of $1.50 per share
Dec 31 Investee company announced that its net income for the year was $100,000

Cost method

Year 2015  
Oct 1 Investee company declared and paid a cash dividend of $1.00 per share
Dec 21  Investee company announced its net income for the year in the amount of $ 80,000
Dec 31 Investor corporation sold all of its shares on investee company for $ 178,000 cash

 

Equity method

Year 2016  
Jan 1 Investor corporations purchased 8,000 shares (20% of investee company’s outstanding stock)

at a cost of $ 150,000.

May 31 Investee company declared and paid a cash dividends of $1.50 per share
Dec 31 Investee company announced that its net income for the year was $100,000

 

Year 2017  
Oct 1 Investee company declared and paid a cash dividend of $1.00 per share
Dec 21  Investee company announced its net income for the year in the amount of $ 80,000
Dec 31 Investor corporation sold all of its shares on investee company for $ 178,000 cash

 

Required:

 

  1. Cost method: Prepare journal entries for years 2014 and 2015 in QuickBooks™ on Investor Corporation’s books using the cost method, which assumes that investor does not have significant influence over Investee (for example, another corporation owns 70% of Investee Company’s stock).
  2. Equity method: Prepare in QuickBooks™ the journal entries for years 2016 to 2017 on Investor Corporation’s books using the equity method, which assumes that Investor has significant influence over Investee Company.
  3. Go to widget at the company name, select settings, and then chart of accounts. Click on cash for cost method and you will see the transactions for the cost method. Click on cash for equity method and you will see the transactions for the equity method. Copy and paste (or export) each to word document, being sure two columns of number show and submit to the assignment area.
  4. In the word submission: Write a brief report between 200 and 300 words in length outlining your recommendations to senior management based on the information presented here
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