Question
On January 1, 2021, Carla Vista Company, a public company, purchased 40% of the common shares of Triple Titanium Inc. for $575,000. The remaining shares
On January 1, 2021, Carla Vista Company, a public company, purchased 40% of the common shares of Triple Titanium Inc. for $575,000. The remaining shares (60%) are held by the family members of the companys founder. Carla Vista considers this a strategic investment and a critical step into developing consumer markets. Triple Titanium is currently a supplier to Carla Vista. Carla Vista placed two members on the 10-person board of directors of Triple Titanium and the two members believe they have been influential on the board through the year. Carla Vista and Triple Titanium both have December 31 year ends. During 2021, Triple Titanium reported profit of $270,000 and paid total dividends of $65,000.
Prepare the following journal entries for Carla Vista, assuming significant influence does exist.
1. | The acquisition of the investment | |
2. | Investment revenue and receipt of dividends related to the investment |
Date | Account Titles and Explanation | Debit | Credit |
2021 | |||
(To record purchase of investment.) | |||
2021 | |||
(To record dividend received from associate.) | |||
2021 | |||
(To record investment income from associate.) |
During 2022, Triple Titanium reports profit of $200,000 and pays total dividends of $74,000. Prepare the required journal entries related to these transactions on Carla Vistas books.
Date | Account Titles and Explanation | Debit | Credit |
2022 | |||
(To record dividend received from associate.) | |||
2022 | |||
(To record investment income from associate.) |
Determine the balance in the investment account on December 31, 2021, and December 31, 2022.
2021 | 2022 | |||
Ending balance | $ | $ |
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