As a long-term investment, Painters' Equipment Company purchased
20% of AMC Supplies Inc.'s 440,000 shares for $520,000 at the
beginning of the fiscal year of both companies. On the purchase
date, the fair value and book value of AMC’s net assets were equal.
During the year, AMC earned net income of $290,000 and distributed
cash dividends of 20 cents per share. At year-end, the fair value
of the shares is $549,000.
Required:
1. Assume no significant influence was acquired.
Prepare the appropriate journal entries from the purchase through
the end of the year.
2. Assume significant influence was acquired.
Prepare the appropriate journal entries from the purchase through
the end of the year.
Assume no significant influence was acquired. Prepare the
appropriate journal entries from the purchase through the end of
the year. (If no entry is required for a transaction/event, select
"No journal entry required" in the first account field.)
1. A. Record the purchase of AMC Supplies shares for $520,000 as a long-term investment.
B. Record Painters' Equipment's share of AMC Supplies' $290,000 net income.
C. Record the cash dividend of 20 cents per share.
D. Record any necessary year-end adjusting journal entry when the fair value of the shares held are $549,000 at year-end.
2.A. Record the purchase of AMC Supplies shares for $520,000 as a long-term investment.
B. Record Painters' Equipment's share of AMC Supplies' $290,000 net income.
C. Record the cash dividend of 20 cents per share.
D. Record any necessary year-end adjusting journal entry when the fair value of the shares held are $549,000 at year-end.
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