On January 2, 2018, Sanborn Tobacco Inc. bought 5% of Jackson Industry\'s capita

Question

On January 2, 2018, Sanborn Tobacco Inc. bought 5% of Jackson Industry's capital stock for $95 million. Jackson Industry's net income for the year ended December 31, 2018, was $125 million. The fair value of the shares held by Sanborn was $108 million at December 31, 2018. During 2018, Jackson declared a dividend of $54 million. Required 1. Prepare all appropriate journal entries related to the investment during 2018 2. Assume that Sanborn sold the stock on January 2, 2019 for $120 million. Prepare the journal entries Sanborn would useto record the sale.

Explanation / Answer

Journal Entries Date Account Title and explanation Debit (Amount in Million) Credit (Amount in Million) Jan- 02, 2018 Investement in Jackson's Stock $                           95          To Cash Account $                             95 (To Record the investment) Dividend Receivable $                       2.70 Dec - 31, 2018 Share in Profit (125 million * 5%) $                       6.25            To Investment in Jackson's Account $                         8.95 (To Record the profit and share of investment) Jan - 02, 2019 Cash $                        120            To Investment in Jackson's Account $                       86.05            To Profit on investment $                       33.95 (To Record the sale of investment) Note: Adjustment entry for the investment made at the 31 dec 2018 is not made because this is not an trading investment

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.