Question

Swifty Inc acquired 100,000 common shares, which is 25% of the outstanding common shares of Tahiti Ltd. on January 1, 2020 for $552,000. At the time of purchase, Tahiti Ltd. depreciable assets were undervalued by $45,000. The depreciable assets had a remaining useful life of 5 years with no salvage value. Tahiti Ltd. declared and paid a cash dividend of $0.30 per share on July 31, 2020. Tahiti Ltd. reported $1.2 million as net income on December 31, 2020 for the year ending. Also, on December 31, 2020, the fair value of the investment in Tahiti Ltd shares was $596,000. Prepare all the journal entries for 2020 in the books of Swifty Inc. relating to above transactions assuming that Swifty Inc. is not in a position to exercise significant influence over Tahiti Ltd, and that Swifty elected to account for its investment following the fair value through net income (FV-NI) model. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem. If no entry is required, select "No Entry" for the account titles and enter for the amounts.) Date Account Titles and Explanation Debit Credit

Answer 1

ANSWER

Date	Accounts Title	Dr	Cr
Jan 1 2020	Investment in Tahiti (FV-NI)	$552,000
	Cash		$552,000
	(being investment made using FV-NI method model recorded)
July 31 2020	Cash	30,000
	Dividend Revenue (.30*100,000)		30,000
	(being dividend received)
Dec 31 2020	Fair value adjustment (596,000-552,000)	44,000
	Unrealized holding gain/losses-Net Income		44,000
	If fair value adjustment account title is not present than use
	Investment in Tahiti (FV-NI)

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