Please let me know if I need to make any changes. This problem relates to "Significant Influence with Price Differential".
I'm not sure if I need any fair value adjustment or if any of my values are incorrect.
1 Problem 20 [significant influence with differential] 2 On January 1, 2020 ABC purchased 100,000 shares of XYZ common shares at purchase price of $13 per 3 share. The ownership of 100,000 shares gives ABC a 20% ownership stake in XYZ, which is sufficient 4 to give ABC significant influence over the operations of XYZ. The fiscal year of ABC ends on 5 December 31. On January 1, 2020, the market value and carrying value were the same for all items on 6 XYZ's balance sheet except for a warehouse, for which the fair value exceeded market value by $80,000. 7 The warehouse has a ten-year remaining useful life. 8 XYZ's GAAP financials reported total net income of $1,500,000 for calendar year 2020. During that 9 year, XYZ declared and paid of $0.50/share on June 30 and December 31st. ABC received the December 10 31 dividend payment on January 1, 2021. XYZ common stock, which is traded on the New York Stock 11 Exchange, closed at $17 per share on December 31, 2020. 12 13 All questions below pertain to the accounting for the investment by ABC. 14 15 16 1. Prepare all journal entries related to the equity investment that is necessary for ABC to issue GAAP 17 compliant financial statements for the year ended December 31, 2020. 18 19 Enter your answer below. Choose the account from the drop-down list in the yellow cell. Enter the amount of the entry in the green box. 20 Entry to record purchase of stock on 1/1/2020: 21 22 Account Debit Credit 23 Investment in XYZ common stock 1,300,000 24 Cash 1,300,000 25 26 27 Entry to record receipt of dividend on 6/30/2020 (assume the dividend payment was received on 6/30): 28 29 Account Debit Credit 30 Dividend receivable 50,000 31 Investment in XYZ common stock 50,000 NN 32 33 34 Entries needed at 12/31/2020: 35 36 Account Debit Credit 37 Dividend receivable 50,000 38 Investment in XYZ common stock 50,000 39 Investment in XYZ common stock 298,400 40 Equity in earnings of XYZ 298,400 w w w w44 . What will be the post-adjustment December 31, 2020 balance in the Investment in Stock account? J: U! Enter your answer in the green box 4 49 3. What will be the post-adjustment December 31, 2020 balance (if any) in the Fair Value Adjustment 50 account? 51 52 Enter your answer in the green box 53 54 4. What amount of dividend revenue (if any) will be reported on the 2020 income statement? 55 56 Enter your answer in the green box 57 58 5. What amount of equity in earnings of XYZ (if any) will be reported on the 2020 income statement? 59 60 61 Enter your answer in the green box 62 63 54 6. At what amount will the investment in XYZ common stock be reported in the asset section of the 55 December 31, 2020 balance sheet? 66 67 Enter your answer in the green box :0 UI 0'1 '4 GO
