Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 13: 10IFRS (page 658)

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

Short Answer

Expert verified

Trading investment debited by $13,200 and cash credited by $13,200. Cash debited by $1,300 and dividend revenue credited by $1,300. Fair value investment debited by $600 and unrealized holding gain or loss-income credited by $600.

Step by step solution

01

Entry for the purchase of investment

Date

Particulars

Debit

Credit

Trading Investment

$13,200

Cash

$13,200

(Being entry for the purchase of trading investment)

02

Dividend revenue entry

Date

Particulars

Debit

Credit

Cash

$1,300

Dividend Revenue

$1,300

(Being entry for the dividend revenue)

03

Fair adjustment entry

Date

Particulars

Debit

Credit

Fair Value Investment

$600

Unrealized Holding Gain or Loss- Income

$600

(Being entry for the fair value adjustment)

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

CA13-2 (Current versus Noncurrent Classification) Rodriguez Corporation includes the following items in its liabilities at December 31, 2017.

l. Notes payable, \(25,000,000 due June 30, 2018.

2. Deposits from customers on equipment ordered by them from Rodriguez, \)6,250,000.

3. Salaries and wages payable, $3,750,000, due January 14, 2018.

Instructions

Indicate in what circumstances, if any, each of the three liabilities above would exclude from current liabilities.

Under what conditions should a provision be recorded?

Distinguish between a determinable current liability and a contingent liability. Give two examples of each type.

How are the terms “probable,” “reasonably possible,” and “remote” related to contingent liabilities?

CA13-7 ETHICS (Warranties) The Dotson Company, owner of Bleacher Mall, charges Rich Clothing Store a rental fee of \(600 per month plus 5% of yearly profits over \)500,000. Matt Rich, the owner of the store, directs his accountant, Ron Hamilton, to increase the estimate of bad debt expense and warranty costs in order to keep profits at $475,000.

Instructions

Answer the following questions.

(a) Should Hamilton follow his boss’s directive?

(b) Who is harmed if the estimates are increased?

(c) Is Matt Rich’s directive ethical?
See all solutions

Recommended explanations on Business Studies Textbooks

Introduction to Business

Read Explanation

Influences On Business

Read Explanation

Organizational Communication

Read Explanation

Organizational Behavior

Read Explanation

Corporate Finance

Read Explanation

Intermediate Accounting

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free