Monty Corporation purchased a 40% interest in Moss Inc. for $120. This investmen

Question

Monty Corporation purchased a 40% interest in Moss Inc. for $120. This investment gave Monty significant influence over Moss. During the year, Moss earned net income of $11 and paid dividends of $4. Assume the purchase price was equal to 40% of Moss's net carrying amount when it was acquired Prepare Monty's journal entries related to this investment using the equity method. Monty applies IFRS. (Round answers to 0 decimal places, e.g. 5,275 Credit account titles are automatically indented when the amount is entered. Do not indent manually, If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit Interest Income 120 Interest Receivable 120 (To record the acquisition of interest in Moss Inc.) FV-NI Investments Investment Income or Loss (To record investment income or loss) Cash Dividends Receivable 4 (To record the dividend received from investment)

Explanation / Answer

Journal entry :

Date accounts & explanation debit credit Investment in Moss Inc. 120     Cash 120 (To record the acquisition of interest in Moss inc.) Investment in Moss Inc. 4.40     Investment income or loss 4.40 (To record investment income or loss) Cash 1     Investment in Moss Inc. 1 (To record the dividend received from investment)

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