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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)

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