On August 1, 2020, Sarasota Corporation purchased 20% of the outstanding voting shares in WLT Corporation for
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Question:
On August 1, 2020, Sarasota Corporation purchased 20% of the outstanding voting shares in WLT Corporation for $1,300,000. At the time of purchase, WLT's net assets were undervalued by $70,400 and had a remaining useful life of 12 years. Both companies had a December 31 year-end. At the end of 2020, WLT reported a net income of $311,000. Also, on December 31, 2020, the fair value of the investment in WLT shares was $1,427,000. On January 10, 2021, WLT paid a cash dividend. Sarasota's ownership entities it to $19,900 of the dividend.
Prepare the journal entries on the books of Sarasota Corporation to record the transactions described above, assuming that the 20% interest in WLT does not represent significant influence, and that Sarasota elected to account for its investment following the fair value through net income (FV-NI) model.
Related Book For
Advanced Financial Accounting
ISBN: 978-0137030385
6th edition
Authors: Thomas Beechy, Umashanker Trivedi, Kenneth MacAulay
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