Investments in Common Stock Both Seco Inc. and Hillsborough Corp. have 100,000 s

Question

Investments in Common Stock

Both Seco Inc. and Hillsborough Corp. have 100,000 shares of no-par common stock outstanding. World Inc. acquired 10,000 shares of Seco stock for $6 per share and 30,000 shares of Hillsborough stock for $12 per share in 2012. Both securities are being held as long-term investments. Changes in retained earnings for Seco and Hillsborough for 2012 and 2013 are as follows:

Give the entries required on the books of World Inc. for 2012 and 2013 to account for its investments.

2012

  

  

  

  

To record dividend received from Seco Inc.

   

  

  

  

  

To record share of Hillsborough Corp. income.

   

  

  

  

  

To record change in value of Seco Inc. Securities

2013

  

  

  

  

To record dividend received from Seco Inc.

   

  

  

  

  

To record dividend received from Hillsborough Corp.

   

  

  

  

  

To record share of Hillsborough Corp. income.

   

  

  

  

  

To record change in fair value of Seco inc. Securities

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Give the entries required on the books of World Inc. for 2012 and 2013 to account for its investments.

2012

  

  

  

  

To record dividend received from Seco Inc.

   

  

  

  

  

To record share of Hillsborough Corp. income.

   

  

  

  

  

To record change in value of Seco Inc. Securities

2013

  

  

  

  

To record dividend received from Seco Inc.

   

  

  

  

  

To record dividend received from Hillsborough Corp.

   

  

  

  

  

To record share of Hillsborough Corp. income.

   

  

  

  

  

To record change in fair value of Seco inc. Securities

Explanation / Answer

Solution:

Journal Entries - World Inc. Year Particulars Debit Credit 2012 Cash Dr $3,750.00        To Dividend revenue $3,750.00 (To record dividend received from Seco Inc.) 2012 Investment in Hillsborough Corp Dr $21,000.00        To Investment Income $21,000.00 (To record share of Hillsborough Corp. income.) 2012 Fair value adjstment Dr $15,000.00        To Unrealized holding gain or loss - OCI $15,000.00 (To record change in value of Seco Inc. Securities) 2013 Cash Dr $4,500.00        To Dividend revenue $4,500.00 (To record dividend received from Seco Inc.) 2013 Cash Dr $6,000.00        To Investment in Hillsborough Corp $6,000.00 (To record dividend received from Hillsborough Corp) 2013 Investment in Hillsborough Corp Dr $12,000.00        To Investment Income $12,000.00 (To record share of Hillsborough Corp. income.) 2013 Unrealized holding gain or loss Dr $10,000.00        To Fair value adjustment $10,000.00 (To record change in fair value of Seco Inc. Securities)

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