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In: Accounting

XYZ purchased $100,000 equity interest in Z-Tech, Inc, on January 1, 2020. On November 30. 2020,...

XYZ purchased $100,000 equity interest in Z-Tech, Inc, on January 1, 2020. On November 30. 2020, Z-Tech paid dividends of $3,000 to XYZ. At December 31, 2020, XYZ's holdings in Z-Tech is valued at $101,000. Prepare the entries necessary to record (1) the purchase of the investment, (2) the receipt of dividends and (3) year-end adjusting entry assuming that XYZ uses the Available for Sale method to account for this investment.

Solutions

Expert Solution

Date Accounts title Dr Cr
Jan 1 2020 Available for sale securities- Z tech $100000
Cash 100000
(being investment made in securities recorded)
Nov 30 2020 Cash 3000
Dividend Revenue 3000
(being dividend revenue recived recorded)
Dec 31 2020 Fair value adjustment-AFS 1000
Unrealized gain on securities-Other comprehensive Income 1000
(being unrealized gain recorded on AFS securities)
101000-100000
Note if Fair value adjsutment-AFS account title is not there than you can use Available for sale securities
If any doubt please comment

ekkarill92 answered 3 years ago
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