On January 2, 2021, Sanborn Tobacco Inc. bought 5% of Jackson Industrys capital stock for $90 million.

Question:

On January 2, 2021, Sanborn Tobacco Inc. bought 5% of Jackson Industry’s capital stock for $90 million. Jackson Industry’s net income for the year ended December 31, 2021, was $120 million. The fair value of the shares held by Sanborn was $98 million at December 31, 2021. During 2021, Jackson declared a dividend of $60 million.

Required:
1. Prepare all appropriate journal entries related to the investment during 2021.
2. Assume that Sanborn sold the stock on January 2, 2022 for $110 million. Prepare the journal entry Sanborn would use to record the sale.

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...

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