Question
In: Accounting
As a long-term investment, Fair Company purchased 20% of Midlin Company’s 300,000 shares for $360,000 at...
As a long-term investment, Fair Company purchased 20% of Midlin Company’s 300,000 shares for $360,000 at the beginning of the reporting year of both companies. During the year, Midlin earned net income of $135,000 and distributed cash dividends of $0.25 per share. At year-end, the fair value of the shares is $375,000. 1. Assume no significant influence was acquired. Record the transactions from the purchase through the end of the year, including any adjustment for the investment’s fair value, if appropriate. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Solutions
Expert Solution
Solution - Journal Entry worksheet (No significant Influence)
Fair Company
| Serial Number | Accounts Title | Debit | Credit |
| 1 | Investment in Midlin Company shares | $360000 | |
| Cash | $360000 | ||
| (Investment done in shares of Midlin company from cash) | |||
| 2 | Cash | $15000 | |
| Dividend Income | $15000 | ||
|
(Amount received of dividend issued by midlin company) Dividend = (300000 shares * $0.25 Per share) * 20% = $15000 |
|||
| 3 | Fair value adjustment ($375000 - $360000) | $15000 | |
| Net unrealized holding gain | $15000 | ||
| (Unrealizes gain is credited on increase in fair value of holdings and fair value recognised) | |||
| 4 | No Entry is required for Net Income since There is no significant influence and hence there is no associate and associatee relationship. | ||
Assumption used in the solution
In entry number 2, it is assumed that dividend declared is related to period after the investment is done by fair company in Midlin Company.
If Dividend is declared related to period before the investment by fair company then 'Investment in Midlin company's shares' account will be credited instead of 'Dividend Income' account.
ekkarill92 answered 2 years agoRelated Solutions
As a long-term investment, Fair Company purchased 20% of Midlin Company’s 300,000 shares for $360,000 at...
As a long-term investment, Fair Company purchased 20% of Midlin
Company’s 300,000 shares for $360,000 at the beginning of the
reporting year of both companies. During the year, Midlin earned
net income of $135,000 and distributed cash dividends of $0.25 per
share. At year-end, the fair value of the shares is $375,000.
1. Assume no significant influence was acquired. Record the
transactions from the purchase through the end of the year,
including any adjustment for the investment’s fair value, if...
As a long-term investment, Painters' Equipment Company purchased 20% of AMC Supplies Inc.'s 470,000 shares for...
As a long-term investment, Painters' Equipment Company purchased
20% of AMC Supplies Inc.'s 470,000 shares for $550,000 at the
beginning of the fiscal year of both companies. On the purchase
date, the fair value and book value of AMC’s net assets were equal.
During the year, AMC earned net income of $320,000 and distributed
cash dividends of 20 cents per share. At year-end, the fair value
of the shares is $582,000.
1. Assume no significant influence was
acquired. Prepare the...
As a long-term investment, Painters' Equipment Company purchased 20% of AMC Supplies Inc.'s 420,000 shares for...
As a long-term investment, Painters' Equipment Company purchased
20% of AMC Supplies Inc.'s 420,000 shares for $500,000 at the
beginning of the fiscal year of both companies. On the purchase
date, the fair value and book value of AMC’s net assets were equal.
During the year, AMC earned net income of $270,000 and distributed
cash dividends of 25 cents per share. At year-end, the fair value
of the shares is $527,000.
Required:
1. Assume no significant influence was acquired.
Prepare...
As a long-term investment, Painters' Equipment Company purchased 20% of AMC Supplies Inc.'s 480,000 shares for...
As a long-term investment, Painters' Equipment Company purchased
20% of AMC Supplies Inc.'s 480,000 shares for $560,000 at the
beginning of the fiscal year of both companies. On the purchase
date, the fair value and book value of AMC’s net assets were equal.
During the year, AMC earned net income of $330,000 and distributed
cash dividends of 25 cents per share. At year-end, the fair value
of the shares is $593,000.
2. Assume significant influence was acquired.
Prepare the appropriate...
As a long-term investment, Painters' Equipment Company purchased 20% of AMC Supplies Inc.'s 400,000 shares for...
As a long-term investment, Painters' Equipment Company purchased
20% of AMC Supplies Inc.'s 400,000 shares for $480,000 at the
beginning of the fiscal year of both companies. On the purchase
date, the fair value and book value of AMC’s net assets were equal.
During the year, AMC earned net income of $250,000 and distributed
cash dividends of 25 cents per share. At year-end, the fair value
of the shares is $505,000.
Required:
1. Assume no significant influence was acquired.
Prepare...
As a long-term investment, Painters' Equipment Company purchased 20% of AMC Supplies Inc.'s 590,000 shares for...
As a long-term investment, Painters' Equipment Company purchased
20% of AMC Supplies Inc.'s 590,000 shares for $670,000 at the
beginning of the fiscal year of both companies. On the purchase
date, the fair value and book value of AMC’s net assets were equal.
During the year, AMC earned net income of $350,000 and distributed
cash dividends of 20 cents per share. At year-end, the fair value
of the shares is $714,000.
1. Assume no significant influence was
acquired. Prepare the...
A Boca Raton Company, Purchased $35,000 shares of common stock of Polo for (Long-Term) Investment $...
A Boca Raton Company, Purchased $35,000 shares of common stock
of Polo for (Long-Term) Investment $ 700,000 during the year for
Polo Corp. Corp reported net income of $300,000 and paid $100,000
of dividends.
a.) assuming that $ 35,000 shares represent a 10% interest in
the Polo Corp.
b.) Prepare what entries in Acct. that Boca Raton Company should
make for it's in Investment Polo Stock that Year.
C.) What is the balance of stock accounts for Polo Investment on...
As a long-term investment, Painters' Equipment Company purchased 25% of AMC Supplies Inc.'s 520,000 shares for...
As a long-term investment, Painters' Equipment Company purchased
25% of AMC Supplies Inc.'s 520,000 shares for $600,000 at the
beginning of the fiscal year of both companies. On the purchase
date, the fair value and book value of AMC’s net assets were equal.
During the year, AMC earned net income of $370,000 and distributed
cash dividends of 25 cents per share. At year-end, the fair value
of the shares is $637,000.
Required:
1. Assume no significant influence was acquired.
Prepare...
As a long-term investment, Painters' Equipment Company purchased20% of AMC Supplies Inc.'s 470,000 shares for...
As a long-term investment, Painters' Equipment Company purchased
20% of AMC Supplies Inc.'s 470,000 shares for $550,000 at the
beginning of the fiscal year of both companies. On the purchase
date, the fair value and book value of AMC’s net assets were equal.
During the year, AMC earned net income of $320,000 and distributed
cash dividends of 20 cents per share. At year-end, the fair value
of the shares is $582,000.Required:1. Assume no significant influence was acquired.
Prepare the appropriate...
As a long-term investment, Bravo Company decided to purchase stock in Zulu Corporation. Bravo purchased 10,000...
As a long-term investment, Bravo Company decided to purchase
stock in Zulu Corporation. Bravo purchased 10,000 shares for a 10
percent ownership share at a cost of $10 per share on January 1,
2016. Zulu Corporation's net income in 2016 was $25,000, and they
paid total dividends of $10,000. At the end of 2016, the Dow Jones
market price for that Zulu stock was $12 per share. Based on this
information, $__________ should be reported on the balance sheet
for...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- PUT IN JAVA PROGRAMMING The StockB class: Design a class named StockB that contains the following...
- Draw a DFA for the following ( ∑ = {0,1}): Set of all strings with.
- In the article from Forbes notes that the goal of a leader is not to clone...
- Many people keep time using a 24 hour clock (11 is 11am and 23 is 11pm,...
- UNIX ONLY -- DIFFICULT LAB ASSIGNMENT This is an extremely difficult subject for me. Could you...
- Do you know why your credit card can be refused even though you are profitable?
- The Following Java expression: S/10 * 10 + 10 – S = C Show that this...
ADVERTISEMENT