Question

Sunland, Inc. purchased 1,890 shares of Oneida Corporation common stock for $89,400. During the year, Oneida paid a cash dividend of $1.00 per share. At year-end, Oneida stock was selling for $45.90 per share. Prepare Sunland’s journal entries to record.

(a) the purchase of the investment,

(b) the dividends received, and

(c) the fair value adjustment.

(Assume a zero balance in the Fair Value Adjustment account.)

Answer 1

Calculation of Dividends Received

Dividends Received = 1,890 * $1

                                = 1,890

Calculation of Fair value Adjustment

=$89,400 - 1,890 * $45.9

=$89,400 - $86,751

=$2,649

S. no	Account Titles & Explanation	Debit$	Credit$
(a)	Equity Investments A/C	89,400
	To Cash A/C		89,400
	(To record the purchase of investment)
(b)	Cash A/C	1,890
	To Dividend Revenue A/C (To record Dividend received)		1,890
(c)	Unrealized Holding Gain or loss - income A/C	2.649
	To Fair value Adjustment A/C		2,649
	(To record fair value Adjustment)

 

Dividends received = 1,890

Fair value adjustment = 2,649