Question

QZ Appendix D Saved Help Save & Exit Submit Required information [The following information applies to the questions displayed below.) Part 2 of 2 Lisa Company had outstanding 100,000 shares of common stock. On January 10, 2018, Marg Company purchased a block of these shares in the open market at $30 per share, with the intent of holding the shares for a long time. At the end of 2018, Lisa reported net income of $240,000 and cash dividends of $0.30 per share. At December 31, 2018, Lisa Company stock was selling at $28 per share. Skipped 2-a. Prepare the journal entries for Marg Company at the dates indicated for Case A: 15,000 shares purchased. 2-b. Prepare the journal entries for Marg Company at the dates indicated for Case B: 34,000 shares purchased. 3. Complete the following schedule to show the separate amounts that should be reported on the 2018 financial statements of Marg Company:

Answer 1

Case - A
Acquition of 15000 shares of Lisa Company
Date	Particulars	Debit	Credit
Jan-18	Marketable Equity shares	$4,50,000
	Cash		$4,50,000
	(15000 Shares @ $30) (15000*30)
Recognition of Net income of $240000 of Lisa Company
Date	Particulars	Debit	Credit
Dec-18	"No Entry Required"
The income has to be recognized in lisa company books and no entry required in the Investor (Marg company)
Recognition of Dividend paid by Lisa Company
Date	Particulars	Debit	Credit
Dec-18	Cash	$4,500
	Dividend Revenue		$4,500
	(15000 Shares @ $0.30) (15000*0.30)
Fair Value adjustment of Shares of Lisa Company at the end of the year
Date	Particulars	Debit	Credit
Dec-18	Net Loss on Equity securities	$30,000
	Marketable Equity shares		$30,000
	Purchase Price per share	$30
	Selling Price per share	$28
	Net loss per share	$2
	No of share	$15,000
	Loss	$30,000
Case - B
Acquition of 34000 shares of Lisa Company
Date	Particulars	Debit	Credit
Jan-18	Investment in Affiliates	$10,20,000
	Cash		$10,20,000
	(34000 Shares @ $30) (34000*30)
Marg company acquires 34% share in Lisa company . Lisa will became Affiliate of Marg company
Recognition of Net income of $240000 of Lisa Company
Date	Particulars	Debit	Credit
Dec-18	"No Entry Required"
The income has to be recognized in lisa company books and no entry required in the Investor (Marg company)
Recognition of Dividend paid by Lisa Company
Date	Particulars	Debit	Credit
Dec-18	Cash	$10,200
	Dividend Revenue		$10,200
	(34000 Shares @ $0.30) (34000*0.30)
Fair Value adjustment of Shares of Lisa Company at the end of the year
Date	Particulars	Debit	Credit
Dec-18	Equity in Affiliates earnings	$68,000
	Marketable Equity shares		$68,000
	Purchase Price per share	$30
	Selling Price per share	$28
	Net loss per share	$2
	No of share	$34,000
	Loss	$68,000
		Case A	Case B
	Marketable Equity securities	$4,20,000
	Investment in Affiliates		$10,20,000
	Dividend Revenue	$4,500	$10,200
	Net gain (Loss) on Equity shares	-$30,000
	Equity in Affiliates earnings		-$68,000