Question

Part A

On January 2, 2017, Mayan corporation purchased 10,000 shares of the stock of Xyz Corp., and did not obtain significant influence.  The investment is intended as a long-term investment. The stock was purchased for $5 per share, and represents a 10% ownership stake. Xyz Corp made $20,000 of net income in 2017, and paid dividends of $5,000 on December 15, 2017. On December 31, 2017, Xyz Corp's stock was trading on the open market for $8 per share at the end of the year.  Use this information to prepare the General Journal entry(ies) for January 2 purchase and the December 15 & 31, 2017 record of income & gain/loss. If no entry is required then write "No Entry Required."

Part B

On January 1, 2017, Mayan Corporation purchased a significant influence shares investment in the Xyz Corp for $250,000.  This investment balance represents 40% of the equity of the Xyz corp.  During 2017, Xyz Corp reported Net Income of $25,000 on November 15, 2017 Xyz Corp paid cash dividends of $10,000 to its shareholders. Use this information to prepare the January 1, November 15 and December 31, 2017 General Journal entry (without explanation.) If no entry is required, then write "No Entry Required."

Answer 1

Solution A:

Journal Entries - Mayan Corporation
Date	Particulars	Debit	Credit
2-Jan-17	Investment in XYZ Corp. - AFS Dr	$50,000.00
	To Cash		$50,000.00
15-Dec-17	Cash Dr	$500.00
	To Dividend revenue		$500.00
31-Dec-17	Fair value adjustment Dr	$30,000.00
	To Unrealized holding gain or loss - OCI		$30,000.00

Solution B:

Journal Entries - Mayan Corporation
Date	Particulars	Debit	Credit
1-Jan-17	Investment in XYZ Corp. Dr	$250,000.00
	To Cash		$250,000.00
15-Nov-17	Cash Dr	$4,000.00
	To Investment in XYZ Corp		$4,000.00
31-Dec-17	Investment in XYZ Corp. Dr	$10,000.00
	To Investment Income		$10,000.00