Fairbanks Corporation purchased 400 ordinary shares of Sherman Inc. as a trading investment for £13,200. During the year, Sherman paid a cash dividend of £3.25 per share. At year-end, Sherman shares were selling for £34.50 per share. Prepare Fairbanks' journal entries to record (a) the purchase of the investment, (b) the dividends received, and (c) the fair value adjustment.
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Answer :
(a) Dr Equity Investmens (trading) $13,200
Cr Cash $13,200
(b) Dr Cash $1,300
(c) Dr Fair Value Adjusment (trading) $600
Cr Unrealized Holding Gain or Loss - Income $600
Explanation :
Preparation of Firbanks' journal entries to record (a) the purchase of the investment, (b) the dividends received and (c) the fair value adjusment.
(a) Dr Equity Investmens (trading) $13,200
Cr Cash $13,200
( To record the purchase of the investment)
(b) Dr Cash $1,300
Cr Dividend Revenue $1,300
(400*$3.25 per share)
(To record dividends received)
(c) Dr Fair Value Adjusment (trading) $600
Cr Unrealized Holding Gain or Loss - Income $600
[(400*$34.50 per share) - $13,200]
(To record the fair value adjusment)
Semoga Membantu ^^
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