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Roberts owns 50% of Smith at has a balance in the investment account of $200,000 at...

Roberts owns 50% of Smith at has a balance in the investment account of $200,000 at December 31, 2015. On January 1, 2016, Roberts purchases an additional 10% ownership in Smith for $70,000. Roberts will Dr. Investment in Smith for $70,000 and credit Cash for $70,000. What additional entry will Roberts be required to make to reflect the increase in ownership?

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Answer #1

There isn't required any journal entry for this regard.

As per double entry system both the aspects of a transaction are satisfied with a single journal entry.

In the given case, After the journal entry the asset side of balance sheet which contains Investment in Smith account will increase by $70000 and amount of cash is reduced by $70000. No other effects will be visible in the balance sheet.

After the journal entry Investment in Smith Account will show actual investment made by Robert, which is $270000 in the given case. So there isn't any journal entry required to show increase in amount of investment, it's automatically increased via original entry of investment.

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