Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

As a long-term investment, Painters' Equipment Company purchased 25% of AMC Supplies Inc.'s 430,000 shares for $510,000 at the beginning of the fiscal year of

As a long-term investment, Painters' Equipment Company purchased 25% of AMC Supplies Inc.'s 430,000 shares for $510,000 at the beginning of the fiscal year of both companies. On the purchase date, the fair value and book value of AMCs net assets were equal. During the year, AMC earned net income of $280,000 and distributed cash dividends of 15 cents per share. At year-end, the fair value of the shares is $538,000.

Required:
1.

Assume no significant influence was acquired. Prepare the appropriate journal entries from the purchase through the end of the year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

CHOOSE FROM THE LIST BELOW TO JOURNALIZE YOUR ENTRIES

No journal entry required

Cash

Cash surrender value of life insurance

Discount on bond investment

Fair value adjustment

Gain on life insurance settlement

Gain on sale of investments

Income summary

Insurance expense

Investment in AMC common shares

Investment in bonds

Investment in U.S. treasury bills

Investment in U.S. treasury bonds

Investment revenue

Investment revenue receivable

Loss on sale of investments

Net unrealized holding gains and lossesI/S

Net unrealized holding gains and lossesOCI

Other-than-temporary impairment lossI/S

Other-than-temporary impairment lossOCI

Retained earnings

A. Record the purchase of AMC Supplies shares for $510,000 as a long-term investment.

B. Record Painters' Equipment's share of AMC Supplies' $280,000 net income.

C. Record the cash dividend of 15 cents per share.

D. Record any necessary year-end adjusting journal entry when the fair value of the shares held are $538,000 at year-end.

2. Assume significant influence was acquired. Prepare the appropriate journal entries from the purchase through the end of the year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

CHOOSE FROM THE LIST BELOW TO JOURNALIZE YOUR ENTRIES

No journal entry required

Cash

Cash surrender value of life insurance

Discount on bond investment

Fair value adjustment

Gain on life insurance settlement

Gain on sale of investments

Income summary

Insurance expense

Investment in AMC common shares

Investment in bonds

Investment in U.S. treasury bills

Investment in U.S. treasury bonds

Investment revenue

Investment revenue receivable

Loss on sale of investments

Net unrealized holding gains and lossesI/S

Net unrealized holding gains and lossesOCI

Other-than-temporary impairment lossI/S

Other-than-temporary impairment lossOCI

Retained earnings

A. Record the purchase of AMC Supplies shares for $510,000 as a long-term investment.

B. Record Painters' Equipment's share of AMC Supplies' $280,000 net income.

C. Record the cash dividend of 15 cents per share.

D. Record any necessary year-end adjusting journal entry when the fair value of the shares held are $538,000 at year-end.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting For MBAs

Authors: Peter D. Easton, John J. Wild, Robert F. Halsey, Mary Lea McAnally

3rd Edition

0978727932, 978-0978727932

More Books

Students also viewed these Accounting questions