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

Note - 1.World Co. owns 10% of Seco Inc. - Cost Method Is used               2.World Co. owns 30% of Hillsborough Corp Inc. - Equity Method Is used Journal Entry Date Particulars Dr. Amt. Cr. Amt. 2012 1 Cash      3,750.00 $37,500 X 10%    Dividend Revenue      3,750.00 (To record dividend received from Seco Inc.) 2 Investment in Hillsborough Corp. Stock    21,000.00 $70,000 X 30%    Income from Investment in Hillsborough Corp. Stock    21,000.00 (To record share of Hillsborough Corp. income) 3 Market Adjustment—Available-for-Sale Securities    15,000.00 ($7.50 - $6) X 10,000 Shares    Unrealized Increase/Decrease in Value of AFS Securities    15,000.00 (To record change in value of Seco Inc. Securities) 2013 1 Cash      4,500.00 $45,000 X 10%    Dividend Revenue      4,500.00 (To record dividend received from Seco Inc.) 2 Cash      6,000.00 $20,000 X 30%    Investment in Hillsborough Corp. Stock      6,000.00 (To record dividend received from Hillsborough Corp.) 3 Investment in Hillsborough Corp. Stock    12,000.00 $40,000 X 30%    Income from Investment in Hillsborough Corp. Stock    12,000.00 $40,000 X 30% (To record share of Hillsborough Corp. income) 4 Unrealized Increase/Decrease in Value of AFS Securities    10,000.00 ($6.50 - $7.50) X 10,000 Shares    Market Adjustment—Available-for-Sale Securities    10,000.00 (To record change in fair value of Seco Inc. Securities)

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