okmarks

Gmail

YouTube

Maps

Adobe Acrobat

Assignment $1-$ Chapter $2-$ Investment in Equity

Saved

Help

Save & Exit

Submit

You skipped this question in the previous attempt.

PART A

On January $1,$ Year $5,$ Anderson Corporation paid $$800,000$ for $25,000(20\%)$ of the outstanding shares of Carter Inc. The investment was considered to be one of significant influence. In Year $5,$ Carter reported profit of $$100,000$; in Year $6,$ its profit was $$110,000.$

Dividends paid were $$65,000$ in each of the two years.

Required:

Calculate the balance in Anderson's investment account as at December $31,$ Year $6.($Omit $ sign in your response.$)$

$01$:$54$:$36$

Balance in Anderson's investment account

PART B

Now assume that on December $31,$ Year $6,$ Anderson lost its ability to significantly influence the operating, investing, and financing decisions for Carter when another party obtained sufficient shares in the open market to obtain control over Carter. Accordingly, the investment in Carter was reclassified as a FVTPL investment. The fair value of the Carter shares was $$40$ per share on this date.

In Year $7,$ Carter reported profit of $$120,000$ and paid dividends of $$55,000.$ On December $31,$ Year $7,$ Anderson sold its investment in Carter for $$42$ per share.

Required:

$($a$)$ Prepare the journal entry at December $31,$ Year $6,$ to reclassify the investment from significant influence to FVTPL$.$