Darlene Inc. purchased 20,000 common shares (20%) of Carlyle Ltd. on January 1, Year 4, for $260,000.
Question:
Darlene Inc. purchased 20,000 common shares (20%) of Carlyle Ltd. on January 1, Year 4, for $260,000. It did not have significant influence over Carlyle. It elected to classify the investment as fair value through OCI. On September 30, Year 5, Darlene obtained significant influence when there was a restructuring of the Board of Directors. Accordingly, Darlene adopted the equity method on a prospective basis.
Additional information on Carlyle for the two years ending December 31, Year 5, is as follows:
On January 1, Year 6, Darlene sold its investment in Carlyle for $300,000.
Required
(a) Calculate the balance in the investment account at the end of each period.
(b) Calculate the profit and OCI to be reported each period.
(c) Prepare the journal entries for the sale of the shares and the transfer of OCI to retained earnings on January 1, Year 6.
Period Year 4 Jan.-Sept. Year 5 Oct.-Dec. Year 5 Net Income $150,000 110,000 50,000 Dividends Paid $90,000 70,000 20,000 Market Value per Share end of period $14.00 14.60 15.00
Step by Step Answer:
a b c Period Year 4 JanSept Year 5 OctDec Year 5 ...View the full answer
Modern Advanced Accounting In Canada
ISBN: 9781260881295
10th Edition
Authors: Hilton Murray, Herauf Darrell
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