Question

Excel format! Please show calculations, it is important! Thank you!

PROBLEM # 1

ABC Co. purchased 1,000 shares of XYZ for $23 each this year and classified the investment as a trading security. ABC sold 400 shares of the stock for $24 each. At year end the price per share of the XYZ Company had increased to $26.

Instructions

Prepare the journal entries for these transactions and any year-end adjustments.

PROBLEM # 2

On January 1, 2017, LabTech Inc. purchased 40% of the common shares of UnderTech Company for $280,000. During the year, UnderTech earned net income of $140,000 and paid dividends of $34,000.

Instructions

Prepare the entries for LabTech to record the purchase and any additional entries related to this investment in UnderTech Company in 2017.

Answer 1

Problem -1	Account Titles	Debit $	Credit $
	Investment in XYZ - Trading	23,000
	Cash ( 1,000 x 23 )		23,000
	Cash ( 400 x 24 )	9,600
	Investment in XYZ - Trading		9,200
	Gain on sale of Investment		400
	Fair Value Adjustment ( 26 - 23 ) x 600	1,800
	Unrealized Holding gain or loss		1,800
Problem -2	Account Titles	Debit $	Credit $
	Investment in Undertech Company	2,80,000
	Cash		2,80,000
	Investment in Undertech Company	56,000
	Investment Revenue ( 140,000 x 40% )		56,000
	Cash ( 34,000 x 40% )	13,600
	Investment in Undertech Company		13,600