Turner Company purchased 35% of the outstanding stock of ICA Company for $10,900
ID: 2608364 • Letter: T
Question
Turner Company purchased 35% of the outstanding stock of ICA Company for $10,900,000 on January 2, 2018. Turner elects the fair value option to account for the investment. During 2018, ICA earns $840,000 of income and on December 30 pays a dividend of $580,000. On December 31, 2018, the fair value of Turner’s investment has increased to $13,300,000.
Prepare the journal entries in the books of Turner to account for this investment during 2018. Assume that Turner will account for the investment for a trading security. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
1.Record the investment.
2.Record the investment revenuerealized
3.Record the fair value adjustment.
Explanation / Answer
Date Account Debit credit January 2,2018 Investment in ICA 10,900,000 cash 10,900,000 [Being investment made] December30,2018 cash 203000 Interest/Investmentrevenue 203000 [beingrevenue realized 580000*.35] December31/2018 Fair value adjustment 2,400,000 net unrealized holding gains and losses-I/S 2,400,000 [Being unrealized gain recorded13300000-10900000]
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