Question
On March 28, 2020, Kermit Inc. purchased 45,000 shares of Bonobo Inc. for $15 per share. Bonobo has 100,000 shares outstanding. On December 1, Kermit
On March 28, 2020, Kermit Inc. purchased 45,000 shares of Bonobo Inc. for $15 per share. Bonobo has 100,000 shares outstanding. On December 1, Kermit received an $0.35 cash dividend per share. On December 31, 2020, Bonobo reported net income of $450,000. At this date, the market price of Bonobo stock is selling for $12 per share. On December 1, 2021, Kermit received a total of $10,000 of cash dividends from Bonobo. On December 31, 2021, Bonobo reported a net loss of $20,000 and the market price is selling for $6 per share on this date. On this date, Kermit sold all of the Bonobo stock for $6 per share.
Instructions
- Record the necessary journal entries based on the information provided.
- Briefly explain, in your own words, how the accounting treatment for debt investments differs compared with the accounting treatment for equity investments.
Computations:
Journal entries:
Date | Account Title | Debit | Credit |
|
|
|
|
Requirement 2:
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started