Question

Exercise 12-19 Investment securities and equity method investments compared [L012-5, 12-6) of the fiscal year of both companies. On the purchase date, the fair value and book value of AMC's net assets were equal no Journal entry worksheet Next >

Answer 1

Solution 1:

Journal Entries - Painter's Equipment Company
Event	Date	Particulars	Debit	Credit
1	1-Jan	Investment in AMC Supplies Dr	$610,000.00
		To Cash		$610,000.00
		(To record purchase of shares)
2	31-Dec	Cash Dr (530000*0.30)	$159,000.00
		To Dividend Revenue		$159,000.00
		(To record dividend received)
3	31-Dec	Fair value adjustment Dr	$38,000.00
		To Unrealized holding gain or loss - OCI		$38,000.00
		(To record adjustment to fair value for investment)

Solution 2:

Journal Entries - Painter's Equipment Company
Event	Date	Particulars	Debit	Credit
1	1-Jan	Investment in AMC Supplies Dr	$610,000.00
		To Cash		$610,000.00
		(To record purchase of shares)
2	31-Dec	Investment in AMC Supplies Dr ($380,000*20%)	$76,000.00
		To Investment Income		$76,000.00
		(To record dividend received)
3	31-Dec	Cash Dr	$159,000.00
		To Investment in AMC Supplies		$159,000.00
		(To record dividend received)