Q14E_1.
Question
Accounting for equity investments
Money Man Investments completed the following transactions during 2018:
Jan. 14 Purchased 400 shares of Technomite stock, paying \(56 per share. The investment represents 25% ownership in Technomite’s voting stock and Money Man has significant influence over Technomite. Money Man intends to hold the investment for the indefinite future.
Aug. 22 Received a cash dividend of \)0.27 per share on the Technomite stock.
Dec. 31 Technomite’s current market value is \(51 per share.
31 Technomite reported net income of \)180,000 for the year ended 2018.
Requirements
1. Journalize Money Man’s transactions. Explanations are not required.
Step-by-Step Solution
VerifiedBoth sides of the journal totals $69,508.
Significant influence can be defined as the ability of the investor to participate in the decision-making process and affect the business decisions. Such influence arises when the investor owns 20% to 50% of the voting stock.
Date | Accounts and Explanation | Debit $ | Credit $ |
14 Jan 2018 | Equity Investment | $22,400 |
|
| Cash |
| $22,400 |
|
|
|
|
22 Aug 2018 | Cash | $108 |
|
| Equity Investment |
| $108 |
|
|
|
|
31 Dec 2018 | Unrealized holding losses | $2,000 |
|
| Fair value adjustments |
| $2,000 |
|
|
|
|
31 Dec 2018 | Equity investment | $45,000 |
|
| Revenue from investment |
| $45,000 |
|
| $69,508 | $69,508 |