Equity Method for Stock 1 On January 4, 20Y6, Spandella Company purchased 128,00

Question

Equity Method for Stock 1 On January 4, 20Y6, Spandella Company purchased 128,000 shares of Filington shares outstanding, incduding the Spandela shares. on July 2 directly from one of the founders for a price of $41 per share. Filington has 400,000 its investment in Filington 20Y6, Filington paid $ 314,000 in total dividends to its shareholders. On December 31, 20Y6, Filington reported a net income of $1,196,000 for the year. Spandella uses the equity method in accounting for a. Sournalize the Spandella Inc entries for the transactions involving its investment in Filington Company during 20Y6. 206 July 2 2016 Dec. 31 Next MacBook Air

Explanation / Answer

purchase of investment journal Entries particulars Debit Credit 4, jan -investment in F co (128000*41) 5248000 cash 5248000 ( to record of investment) Receipt of Dividend particulars Debit Credit 2, july -                     cash 100480 investment in F co 100480 (to cash dividend received 32% i.e 128000/400000) Accrued share of income 31, dec   investment in F co(1196000*32%) 382720 equity in investee income 382720 ( to record accrued earning ) b) determine the investment in filington company initial investment- dividend received + accrued earning =5248000-100480+382720 5530240

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