Question

The beginning balance sheet of Music Source Co. included a $700,000 investment in Ellen stock (25% ownership, Music has significant influence over Ellen). During the year, Music Source completed the following investment transactions: A (Click the icon to view the transactions.) Read the requirements. Mar. 3 More Info Mar. Purchased 6,000 shares at $12 per share of Job Software common stock as a long-term equity investment, representing 1% ownership, no significant influence. Received a cash dividend of $0.83 per share on the Job investment. May 15 May 15: Received a cash divi Received a cash dividend of $30,000 from Ellen investment. Dec. 15 31 Received Ellen's annual report showing $110,000 of net income. Date 31 Received Job's annual report showing $800,000 of net income for the year. May 15 Ellen's stock fair value at year-end was $697,500. 31 Job's common stock fair value at year-end was $14 per share. Done Print Dec. 15: Received a cash dividend of $30,000 from Ellen investment.

Answer 1

Credit (6.000 x $12) 72,000 4980|6,000 x $0.83) Answer: Date Accounts and Explanation Debit Mar-03 Long-Term Investments-Available-for-Sale 72,000 Cash [To record Purchased investment in stock] May-15 Cash 4980 Dividend Revenue [To record received cash dividend] Dec. 15 Cash 30.000 Long-Term Investments—Ellen Received cash dividend (equity method). Dec. 31 Long-Term Investments—Ellen 27,500 Revenue from Investments Recorded revenue earned from investment (equity method)] 30,000 27,500 ($110000 x 25%) Dec. 31 No entry required Dec. 31 No entry required 12.000 Dec. 31 Fair Value Adjustment-Available-for-Sale Unrealized Holding Gain-Available-for-Sale IrAdjusted available-for-sale investment to market value] 12,000 Working Note: Gain(Loss) - Market value of Investment - Cost of investment Gain(Loss) = [(6000 x $14) - 72,000 ] Gain(Loss) = ($84.000 - 72,000 ] Gain(Loss) = $12,000