In: Accounting
Jeffery Company purchased 10% of the outstanding common stock (75,000 shares) of Another Company on January 1, 2020 for $750,000. The investment was not sufficient to give Jeffery Company the ability to significantly influence the operations of Another Company. On January 1, 2020, the fair value of the percentage of Another Company’s net assets purchased by Jeffery Company exceeded book value by $20,000. The difference was attributable to plant assets with remaining useful life of five years. During 2020, Another Company reported net income of $150,000 and paid dividends of $40,000. The fair value of Another Company’s common stock on December 31, 2020 was $15 per share.
The entry to record the purchase of the stock on January 1, 2020 would include?
The entry to record the dividends Jeffery Company received from Another Company would include? check figure; A credit to investment revenue for $4,000
As a result of the investment, Jeffery Company's income before income tax for the year ended December 31, 2020 would increase by? check figure;$379,000
The entry on December 31, 2020 to recognize changes in fair value would include? check figure: A credit to unrealized holding gain for $375,000
Jeffery Company would report an investment in Another Company on the balance sheet as of December 31, 2020 of?
Please explain in detail the answers I would appreciate the help thanks.
Since the Holding is than 20% Cost Method also known as Fair Value Mthod will be used for accounting
JOURNAL:
Investment In Equity Shares....DR 750000
Cash .........................................CR 750000
JOURNAL
Entry-1
Cash.....................DR 4000
Dividend Income...CR 4000
Entry-2
Dividend Income...DR 4000
Profit and Loss A/C...CR 4000