Question
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. |
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