Question
James, an investor in Greggson Co., asked Taylorson, CPA, for advice on the propriety of Greggson's financial reporting for two of its investments. Taylorson obtained
James, an investor in Greggson Co., asked Taylorson, CPA, for advice on the propriety of Greggson's financial reporting for two of its investments. Taylorson obtained the following information related to the investments from Greggson's December31, 20X9 financial statements:
1. Greggson has 20% ownership interest in Rose Co., represented by 200,000 shares of outstanding common stock purchased on January 2, 20X9 for $600,000. This investment gives Greggson significant influence over Rose. Greggson did not elect the fair value option for this investment.
2. Greggson has 20% ownership interest in Sharon Co., represented by 20,000 shares of outstanding common stock purchased on January 2, 20X9 for $300,000. This investment does NOT give Greggson significant influence over Sharon. Greggson did not elect the fair value option for this investment.
3. On January 2, 20X9, the carrying amounts of the acquired shares of both investments equaled their purchase prices.
4. Rose reported earnings of $400,000 for the year ended December 31, 20X9 and declared and paid dividends of $100,000 during 20X9.
5. Sharon reported earnings of $350,000 for the year ended December 31, 20X9 and declared and paid dividends of $60,000 during 20X9.
6. On December 31, 20X9, Rose's and Sharon's common stock were trading over the counter at $18 and $20 per share, respectively.
Complete Greggson's summary of investment securities using the information above. For each item, enter the appropriate amounts in the associated cells. Enter all amounts as positive values. If no answer is necessary, enter a zero (0).
Balance sheet Investment in Rose Investment in Sharon
1. Investment in investee
Statement of income Investment in Rose Investment in Sharon
2. Equity in earnings of investee
3. Dividend income
4. Unrealized holding gain
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