Question
Fortran Inc. purchased 100,000 shares, representing more than 20%, of Cobol Company on January 1, 2016. On July 1, 2016, Cobol paid dividends. The cost
Fortran Inc. purchased 100,000 shares, representing more than 20%, of Cobol Company on January 1, 2016. On July 1, 2016, Cobol paid dividends. The cost of the purchase, Cobols net income and total dividends for 2016 are given below. The market price of Cobols stock at 12/31/16 was $60 per share.
What method of accounting should Fortran Inc. use to account for the investment in Cobol.
Prepare the journal entry for the receipt of dividends for Fortran on July 1, 2016.
Prepare the necessary journal entry (s) for Fortran as of December 31, 2016.
What is the value of the investment in Cobol on Fortrans balance sheet at December 31, 2016, if Fortran did not elect the fair value option?
What is the value of the investment in Cobol on Fortrans balance sheet at December 31, 2016, if Fortran elected the fair value option? Prepare the necessary journal entry.
| % Purchased | Cost | Total Dividends Paid | Net Income | |
| M S | 30% | $5,250,000 | $1,000,000 | $4,000,000 |
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Governmental Accounting Auditing And Financial Reporting
Authors: Michele Mark Levine, Todd Buikema
10th Edition
0891250107, 978-0891250104
