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Tori122367
21.03.2020 •
Business
Buffalo Corporation purchased 380 shares of Sherman Inc. common stock for $12,900 (Buffalo does not have significant influence). During the year, Sherman paid a cash dividend of $3.25 per share. At year-end, Sherman stock was selling for $37.50 per share.
Prepare Buffalo's journal entries to record (a) the purchase of the investment, (b) the dividends received, and (c) the fair value adjustment.
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Ответ:
(a) the purchase of the investment
Debit: Equity Investments $12,900
Credit: Cash $12,900
(b) the dividends received
Debit: Cash $1,235
Credit: Dividend income $1,1235
(c) the fair value adjustment
Debit: Fair Value Adjustment $1,350
Credit: Unrealized Holding Gain or Loss - Gain $1,350
Explanation:
Note: See the attached to see how the following journal entries will appear in the book:
These are recorded as follows:
Buffalo Corporation
(a) the purchase of the investment
Debit: Equity Investments $12,900
Credit: Cash $12,900
Being the amount paid to purchase the common stock of Sherman Inc.
(b) the dividends received
Debit: Cash $1,235
Credit: Dividend income $1,1235
Being the amount cash dividend received from investment in Sherman Inc.
Note: Dividend received is calculated as follows:
Dividend received from Sherman Inc. = 380 × $3.25 = $1,235.
(c) the fair value adjustment
Debit: Fair Value Adjustment $1,350
Credit: Unrealized Holding Gain or Loss - Gain $1,350
Being the unrealized gain from holding the investment in Sherman Inc.
Note: The unrealized gain is calculated as follows:
Unrealized gain = [$37.50 – ($12,900/380)] × 380 = $1,350
Ответ:
Mierd
Step-by-step explanation: