As a long-term investment, Fair Company purchased 20% of Midlin Company’s 300,000 shares for $360,000 at...

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. 2. Assume 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.

Solutions

Expert Solution

Solution 1:

Journal Entries - Fair company
Event	Particulars	Debit	Credit
1	Investment in Midlin Company Dr	$360,000.00
	To Cash		$360,000.00
	(To record investment in Midlin Company)

2	No Journal entry required

3	Cash Dr	$15,000.00
	To Dividend revenue		$15,000.00
	(To record dividend received)

4	Fair value adjustment Dr	$15,000.00
	To Unrealized holding gain or loss - OCI		$15,000.00
	(To record adjustment to fair value)

Solution 2:

Journal Entries - Fair company
Event	Particulars	Debit	Credit
1	Investment in Midlin Company Dr	$360,000.00
	To Cash		$360,000.00
	(To record investment in Midlin Company)

2	Investment in Midlin Company Dr	$27,000.00
	To Investment Income		$27,000.00
	(To record share of income in Midlin)

3	Cash Dr	$15,000.00
	To Investment in Midlin Company		$15,000.00
	(To record dividend received)

4	No Journal entry required

ekkarill92 answered 1 year ago

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