Harry Inc., a publicly traded company, purchased 1,000 shares, constituting a 40% owner-ship interest, in Sally Inc.

Question:

Harry Inc., a publicly traded company, purchased 1,000 shares, constituting a 40% owner-ship interest, in Sally Inc. on January 1, 20X1 for $ 150,000. Harry Inc.’s income under the cost basis for 20X1 is $ 80,000. Sally’s income per its separate- entity financial statements is $ 15,000 and it paid a total dividend of $ 20,000 in 20X1. Both companies have the same year-end. At year- end, each share of Sally was trading at $ 100 in the market.

Required

a) Based on the above information, calculate/ show (i) journal entries made by Harry in its books relating to its investment in Sally, and (ii) the balance in its investment in Sally account at year-end, assuming that Harry treats its investment in Sally as a FVTOCI investment.

b) Based on the above information, calculate/ show the (i) journal entries made by Harry in its books relating to its investment in Sally (ii) total income of Harry for the year, and (iii) balance in its investment in Sally account at year- end, assuming that Harry treats its investment in Sally as a significantly influenced investment.

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...