Question

Splish Corp. was a 30% owner of Blossom Company, holding 210,000 shares of Blossom's common stock on December 31, 2019. The investment account had the following entries. 1/1/18 Cost 12/31/18 Share of income 12/31/19 Share of income Investment in Blossom $3,100,000 12/6/18 Dividend received 410.000 12/5/19 Dividend received 480.000 $150,000 260.000 On January 2, 2020, Splish sold 126,000 shares of Blossom for $3,370,000, thereby losing its significant influence. During the year 2020, Blossom experienced the following results of operations and paid the following dividends to Splish. Blossom Income (Loss) $290,000 Dividends Paid to Splish $49,000 2020 At December 31, 2020, the fair value of Blossom shares held by Splish is 51,520,000. This is the first reporting date since the January 2 sale (b) Compute the carrying amount of the investment in Blossom as of December 31, 2020 (prior to any fair value adjustment). Carrying amount $ (c) Prepare the adjusting entry on December 31, 2020, applying the fair value method to Splish's long-term investment in Blossom Company securities. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter for the amounts.) Account Titles and Explanation Debit Credit Dec 31, 2020 Date

Answer 1

(b)	Carrying Amount
		Amount $
	On December 31,2019	3,580,000	=3100000+410000+480000-150000-260000
	Less: Proportionate cost of shares sold on January 2,2020	2,148,000	(3,580,000 x 126,000 ) / 210,000
	Carrying amount on December 31,2020	1,432,000

(c )	Date	Account Titles and Explanation	Debit $	Credit $
	Dec.31,2020	Fair value Adjustment/ Equity Investment	88,000
		Unrealized Holding Gain or Loss		88,000
		( 1,520,000 - 1,432,000 )