Question
On October 15, 2020, Buyer Incorporated (Buyer) purchased 3,000 common shares of Petersburg Corporation for $38,000 plus $2,000 of commissions. On December 31, 2020, the
On October 15, 2020, Buyer Incorporated (Buyer) purchased 3,000 common shares of Petersburg Corporation for $38,000 plus $2,000 of commissions.
On December 31, 2020, the 3,000 Petersburg common shares had a fair value of $46,000. If these shares were to be sold, a commission of $4,000 would have to be paid.
On January 1, 2021, Buyer sells 2,250 of the 3,000 Petersburg common shares for gross proceeds of $16.00 per share. Commission of $2,250 were paid.
On December 31, 2021, the remaining 750 Petersburg common shares have a fair value of $11,500.
REQUIRED
Assume that buyer accounts for this investment using the FV-NI method
A)Prepare the applicable journal entries including adjusting journal entries, for 2020. Do not prepare closing entries
B)Prepare the applicable journal entry to account for the sale on January 1, 2021
C) Under what circumstances should a company use the FV-NI method of accounting?
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Audit Findings Of RAC MAC HAC And PSI Review Process
Authors: Mrs. Jyoti Sharma
1st Edition
1511689609, 978-1511689601
