Markle Inc. paid $760,000 for a 35 percent investment in the common shares of Harry Systems Inc.
Question:
Markle Inc. paid $760,000 for a 35 percent investment in the common shares of Harry Systems Inc. For the first year, Harry Systems Inc. reported net income of $360,000 and at year-end declared and paid cash dividends of $105,000. On the balance sheet date, the fair value of Markle Inc.’s investment in Harry Systems Inc. shares was $780,000.
Required
1. Which method is appropriate for Markle Inc. to use in accounting for its investment in Harry Systems Inc.? Why?
2. Show everything that Markle Inc. would report for the investment and any investment revenue in its year-end financial statements.
3. What role does the fair value of the investment play in this situation?
Step by Step Answer:
1 Aap per the GAAP The investment should be recorded at Cost untill there is any permanent declined ...View the full answer
Horngrens Accounting
ISBN: 9780135359785
11th Canadian Edition Volume 2
Authors: Tracie Miller Nobles, Brenda Mattison, Ella Mae Matsumura, Carol A. Meissner, Jo Ann Johnston, Peter R. Norwood
