Marigold Inc. acquired 10% of the outstanding common shares of Gregson Inc. on D
ID: 2541739 • Letter: M
Question
Marigold Inc. acquired 10% of the outstanding common shares of Gregson Inc. on December 31, 2016. The purchase price was $999,600 for 47,600 shares, and is equal to 10% of Gregson’s carrying amount. Gregson declared and paid a $0.70 per share cash dividend on June 15 and again on December 15, 2017. Gregson reported net income of $485,000 for 2017. The fair value of Gregson’s shares was $26 per share at December 31, 2017. Marigold is a public company and applies IFRS.
Prepare the journal entries for Marigold for 2016 and 2017, assuming that Marigold cannot exercise significant influence over Gregson. The investment is accounted for using the FV-OCI model. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Date
Account Titles and Explanation
Debit
Credit
Date:________________________
________________________
Date________________________
_______________________
Date ________________________
_________________________
Date _________________________
________________________
Prepare the journal entries for Marigold for 2016 and 2017, assuming that Marigold can exercise significant influence over Gregson. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Date
Account Titles and Explanation
Debit
Credit
Date:________________________
________________________
Date________________________
_______________________
Date ________________________
_________________________
(To record the dividend received from investments)
Date _________________________
________________________
(To record Investment Income or Loss)
What amount is reported for the investment in Gregson shares on the December 31, 2017 statement of financial position under each of these methods inFair Value Method and Equity Method?
FAIR VALUE METHOD
Investment $____________
EQUITY METHOD
Investment $____________
Where is the investment reported on statement of financial position?
The Investment accounts under both Fair Value Method and Equity Method are likely to be included in (Choose one, non current asstes, non current liabilities, current assets, current liability)
What amount is reported on Marigold’s statement of comprehensive income in 2017 under each of these methods? (Do not leave any answer field blank. Enter 0 for amounts.)
Marigold Inc.
Statement of Comprehensive Income
Date:
__________________Fair value method ---------Equity Method
___________________$___________________$____________
___________________$___________________$____________
___________________$___________________$____________
Other comprehensive income:
Effect on comprehensive income in 2017
___________________$___________________$____________
Date
Account Titles and Explanation
Debit
Credit
Explanation / Answer
Answer 1-a. Securities Classified as Availbale for Sale Journal Entry Date Particulars Dr. Amt. Cr. Amt. 31-Dec-16 Available for Sale Securities 999,600.00 Cash 999,600.00 (record the common stock - Gregson Inc. Purchased) 15-Jun-17 Cash (47,600 Shares X $0.70) 33,320.00 Dividend Revenue 33,320.00 (record the dividend recd) 15-Dec-17 Cash (47,600 Shares X $0.70) 33,320.00 Dividend Revenue 33,320.00 (record the dividend recd) 31-Dec-17 Fair Value Adjustment 238,000.00 Unrealized Holding Gain (loss) Equity 238,000.00 (record the fair value adjustment entry) Fair Value - 47,600 Shares X $26 1,237,600.00 Cost of Investment 999,600.00 Unrealized Gain (loss) on Invetsment 238,000.00 Answer 1-b. Significant Influence over Gregson Inc. Journal Entry Date Particulars Dr. Amt. Cr. Amt. 31-Dec-16 Investment in Gregson Inc. 999,600.00 Cash 999,600.00 (record the common stock - Gregson Inc. Purchased) 15-Jun-17 Cash (47,600 Shares X $0.70) 33,320.00 Investment in Gregson Inc. 33,320.00 (record the dividend recd) 15-Dec-17 Cash (47,600 Shares X $0.70) 33,320.00 Investment in Gregson Inc. 33,320.00 (record the dividend recd) 31-Dec-17 Investment in Gregson Inc. ($485,000 X 10%) 48,500.00 Revenue From Investment 48,500.00 (record the share of Net income in Gregson Inc.) Answer 2. Balance Sheet (Dec 31, 2017) Fair Value Method Current Assets Investments 1,237,600.00 Stockholders' Equity Unrealized Holding Gain (loss) Equity 238,000.00 Income Statement (Dec 31, 2017) Fair Value Method Other Income Dividend Revenue 66,640.00 Balance Sheet (Dec 31, 2017) Equity Method Non Current Assets Investments 981,460.00 Income Statement (Dec 31, 2017) Fair Value Method Other Comprehensive Income Revenue From Investment 48,500.00
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