On September 1, Big Apple Inc. purchased 5,000 shares of common stock of Mack Corp. for...

 

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On September 1, Big Apple Inc. purchased 5,000 shares of common stock of Mack Corp. for $500,000. Big Apple has insignificant influence over Mack Corp. On November 15, Big Apple sold 2,000 shares of Mack stock for $110 per share. At December 31, Mack Corp. declared and paid dividends of $3 per share. The fair value of the remaining investment in Mack Corp. was $324,000 on December 31. Prepare the following entries for Big Apple Inc. a. Purchase of shares of Mack stock on September 1. b. Sale of shares on November 15, under Accounting Treatment #1: Compute the gain or loss on sale as the difference between the cash received and the original cost of the investment. Adjust the Fair Value Adjustment account only at year-end. c. Dividends declared and received on December 31. d. Adjustment of FVA account on December 31. On September 1, Big Apple Inc. purchased 5,000 shares of common stock of Mack Corp. for $500,000. Big Apple has insignificant influence over Mack Corp. On November 15, Big Apple sold 2,000 shares of Mack stock for $110 per share. At December 31, Mack Corp. declared and paid dividends of $3 per share. The fair value of the remaining investment in Mack Corp. was $324,000 on December 31. Prepare the following entries for Big Apple Inc. a. Purchase of shares of Mack stock on September 1. b. Sale of shares on November 15, under Accounting Treatment #1: Compute the gain or loss on sale as the difference between the cash received and the original cost of the investment. Adjust the Fair Value Adjustment account only at year-end. c. Dividends declared and received on December 31. d. Adjustment of FVA account on December 31.

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A Purchase of shares of Mack stock on September 1 Debit Investment in Mack Corp 500000 Credit Cash 5... View the full answer