3. As a long-term investment at the beginning of the 2019 fiscal year, Bates Int
ID: 2555282 • Letter: 3
Question
3. As a long-term investment at the beginning of the 2019 fiscal year, Bates International purchased 20% of Hotel value of the shares were the same at that time. During the year, Hotel $40 million and distributed cash dividends of 1.25 per share. At the end of the year, the fair value of the shares is $52 million. (18pts) I Inc's 8 million shares of common stock for $56 million. The fair value and the book Assume no significant influence was acquired. Prepare the appropriate journal entries from the purchase through the end of year. a. b. Assume significant influence was acquired. Prepare the appropriate journal entries from the purchase through the end of the year.Explanation / Answer
a. When no significant influence is acquired..the journal entries would be:-
Debit Credit
Investment in Hotel Inc.shares $56 million
To Bank A/c $ 56 million
Cash A/c $10 million
To Investment Revenue $10million
Fair Value Adjustment $ 4million
To Net Realised Holdings gains and losses-OCI $ 4 million
b. When significant influence is acquired,the journal entries would be:-
Debit Credit
Investment in Hotel Inc.shares $56 million
To Bank A/c $ 56 million
Investment in Hotel Inc.shares $40 million
To Investment Revenue $ 40 million
Cash $10 million
To Investment in Hotel Inc.shares $ 10 million
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