As a long investment XYZ purchased 20% of AMC 400000 shares for $480000 at the b

Question

As a long investment XYZ purchased 20% of AMC 400000 shares for $480000 at the beginning of the fiscal year of both companies..On the purchase date,the fair value and the book value of AMC net assets were equal. During the year AMC earned net income of $250000and distributed cash dividends of 25 cents per share .At year-end ,the fair value of the shares is $505000
1. Assume no significant influence was acquired .Prepare the appropriate journal entries from the purchase throught the end of the year
2.Assume significant influence was acquired.Prepare the appropriate jurnal entries from the purchase thruogh the end of the year.

Explanation / Answer

1 Dr $ Cr $ Shares in AMC 480000     Cash 480000 (to purchase AMC Stock ) Cash 120000      Dividend from AMC 120000 (Being 25% of share value Devidend received) 2 Shares in AMC 480000     Cash 480000 (to purchase AMC Stock ) Cash 120000      Dividend from AMC 120000 (Being 25% of share value Devidend received) Un realized holding gain 25000     Adjusted in fair value methode 25000 (Being Fair value is increased 505000 - 480000) Working: Each Share Value = Total Shares value / Number of shares = 480000 / 400000 = $1.2 Dividend Rate = 25% of share value = 1.2 *25% Dividend per each share = $0.3 Dividend for XYZ = 400000 * 0.3 = $120000 Thank you.... 1 Dr $ Cr $ Shares in AMC 480000     Cash 480000 (to purchase AMC Stock ) Cash 120000      Dividend from AMC 120000 (Being 25% of share value Devidend received) 2 Shares in AMC 480000     Cash 480000 (to purchase AMC Stock ) Cash 120000      Dividend from AMC 120000 (Being 25% of share value Devidend received) Un realized holding gain 25000     Adjusted in fair value methode 25000 (Being Fair value is increased 505000 - 480000)

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