Buffalo Corp. was a 30% owner of Carla Company, holding 210,000 shares of Carla’s common stock on December 31, 2019. The investment account had the following entries.

Investment in Carla
1/1/18 Cost		$3,120,000	12/6/18 Dividend received		$140,000
12/31/18 Share of income		390,000	12/5/19 Dividend received		230,000
12/31/19 Share of income		490,000

On January 2, 2020, Buffalo sold 126,000 shares of Carla for $3,300,000, thereby losing its significant influence. During the year 2020, Carla experienced the following results of operations and paid the following dividends to Buffalo.

		Carla Income (Loss)		Dividends Paid to Buffalo
2020

At December 31, 2020, the fair value of Carla shares held by Buffalo is $1,590,000. This is the first reporting date since the January 2 sale.

(b) Compute the carrying amount of the investment in Carla 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 Buffalo’s long-term investment in Carla 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 0 for the amounts.)

Date	Account Titles and Explanation	Debit	Credit
Dec. 31, 2020

Answer rating: 100% (QA)

Solution b Carrying Amount Amount On December 312019 3630000 312000039000049... View the full answer