Answered

Looking for reliable answers? Westonci.ca is the ultimate Q&A platform where experts share their knowledge on various topics. Connect with a community of experts ready to help you find accurate solutions to your questions quickly and efficiently. Join our platform to connect with experts ready to provide precise answers to your questions in different areas.

As a long-term investment, Fair Company purchased 20% of Midlin Company's 300,000 shares for $360,000 at the beginning of the reporting year of both companies. During the year, Midlin earned net income of $135,000 and distributed cash dividends of $0.25 per share. At year-end, the fair value of the shares is $375,000. 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.

Required:
Record the transactions from the purchase through the end of the year, including any adjustment for the investment’s fair value, if appropriate.

Sagot :

abiolataiwo2015

The appropriate journal entry to record the transactions from the purchase through the end of the year, including any adjustment for the investment are:

1. Journal entries

1. Debit Investment in Midlin common shares $360,000

Credit Cash $360,000

(To record investment in Midlin common shares)

2. No journal entry required

3.  Debit Cash $15,000

($300,000×$0.25×20%)

Credit  Investment revenue $15,000

(To record dividend received)

4. Debit Fair value adjustment  $15,000

Credit Net unrealized holding gains and losses- OCI $15,000

($375,000-$360,000)

(To record fair value adjustment)

2. Journal entries

1. Debit Investment in Midlin common shares $360,000

Credit Cash $360,000

(To record investment in Midlin common shares)

2. Debit Investment in Midlin common shares $27,000

Credit Investment revenue $27,000

($135,000×20%)

(To record investment revenue)

3.  Debit Cash $15,000

($300,000×$0.25×20%)

Credit  Investment revenue $15,000

(To record dividend received)

4. No journal entry required

Learn more here:https://brainly.com/question/15422359

Thank you for your visit. We're dedicated to helping you find the information you need, whenever you need it. We hope you found what you were looking for. Feel free to revisit us for more answers and updated information. We're dedicated to helping you find the answers you need at Westonci.ca. Don't hesitate to return for more.