In: Accounting
Heritage Ltd. was organized on January 2, 2020. The following
investment transactions and events occurred during the following
months:
2020 | |||
Jan. | 6 | Heritage paid $576,500 for 50,100 shares (20%) of Port Inc. outstanding common shares. | |
Apr. | 30 | Port declared and paid a cash dividend of $1.20 per share. | |
Dec. | 31 | Port announced that its profit for 2020 was $490,000. Fair value of the shares was $11.90 per share. | |
2021 | |||
Oct. | 15 | Port declared and paid a cash dividend of $0.80 per share. | |
Dec. | 31 | Port announced that its profit for 2021 was $640,000. Fair value of the shares was $12.28 per share. | |
2022 | |||
Jan. | 5 | Heritage sold all of its investment in Port for $683,000 cash. |
Assume that Heritage has a significant influence over Port with its
20% share.
1. Prepare the entries to record the preceding transactions in Heritage’s books.
a. Record the purchase in strategic investment.
b. Record the dividends received from strategic investment.
c. Record the share of profits of equity investment.
d.Record the dividends received in equity investment.
e.Record the share in profits of equity investment
f. Record sale in strategic investment.
2. Calculate the carrying value per share of Heritage’s investment as reflected in the investment account on January 4, 2022. (Round your answer to 2 decimal places.)
Carrying valve per share. __________?
3. Calculate the change in Heritage’s equity from January 2, 2020, through January 5, 2022, resulting from its investment in Port.
equity _____ by ______
1.) | S.No. | Date | Account Titles | Debit $ | Credit $ |
a | Jan.6,2020 | Investment in Port Inc. | 576,500 | ||
Cash | 576,500 | ||||
b | Apr.30,2020 | Cash | 60,120 | ||
Investment in Port Inc. | 60,120 | ||||
( 50,100 x 1.20 ) | |||||
c | Dec.31,2020 | Investment in Port Inc. | 98,000 | ||
Investment revenue | 98,000 | ||||
( 490,000 x 20% ) | |||||
d. | Oct.15,2021 | Cash | 40,080 | ||
Investment in Port Inc. | 40,080 | ||||
( 50,100 x 0.80 ) | |||||
e | Dec.31,2021 | Investment in Port Inc. | 128,000 | ||
Investment revenue | 128,000 | ||||
( 640,000 x 20% ) | |||||
f | Jan.5,2022 | Cash | 683,000 | ||
Loss on sale of Investment | 19,300 | ||||
Investment in Port Inc. | 702,300 | ||||
( 576,500 - 60,120 + 98,000 - 40,080 + 128,000 ) | |||||
2.) | Carrying value per share on January 4,2022 | $14.02 | (702,300 / 50,100 ) |
3.) | Change in Hertiage | ||
Equity increased by $ 206,700 | (98,000 + 128,000 - 19,300 ) | ||