Question

Complete the journal entries as necessary for both Part 1 and Part 2.

Part 1. Transaction

1. On January 1st of 2020, Casey bought 10% of Apple 100,000 shares of outstanding common stock at $20 a share.

2. On December 31, 2020 Apple reported $40,000 of net income and paid $20,000 of dividends.

3. On December 31, 2020, the market price of stock was $ 25 a share. Assume there was a zero balance in the fair value adjustment account.

Part 2. Complete the journal entries as required: Transaction

4. On January 1st of 2020, Casey bought 30% of Apple 100,000 shares of outstanding common stock at $20 a share and has significant influence.

5. On December 31, 2020 Apple reported $40,000 of net income and paid $20,000 of dividends.

6. On December 31, 2020, the market price of stock was $ 25 a share. Assume there was a zero balance in the fair value adjustment account before this transaction.

Answer 1

	Part-1	Journal Entries
	S.No.	Date	Particulars	Debit	Credit
	1	01-01-2020	Investment in apple common stock	20,00,000
			To Bank A/c		20,00,000
	2	31-12-2020	Bank A/c	2,000
			To Dividend Income		2,000
	3	31-12-2020	Fair value adjustment	50,000
			To Unrealized holding gain (on Income Statement)		50,000
	Part-2	Journal Entries
	4	01-01-2020	Investment in apple common stock	20,00,000
			To Bank A/c		20,00,000
	5	31-12-2020	Bank A/c	6,000
			To Dividend Income		6,000
	6	31-12-2020	Fair value adjustment	50,000
			To Unrealized holding gain (on Income Statement)		50,000