Question
Fredo, inc., purchased Sonny Enterprises for $1,000,000.00 on January 1, 2016, Sonny recognized a total of $400,000.00 net income during 2016, paid $30,000.00 of dividends
Fredo, inc., purchased Sonny Enterprises for $1,000,000.00 on January 1, 2016, Sonny recognized a total of $400,000.00 net income during 2016, paid $30,000.00 of dividends to Fredo during 2016, and at December 31, 2016, the market value of the Sonny investment increased to $1,040,000.00
Required:
Prepare the journal entries neccessary to account for the Sonny investment, assuming that Fredo accounts for that investment as (1.) an available-for-sale investment, and elects the fair-value option.
(2.) as investment with significant influence using equity method
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