On January 1, 2020, Santos Ltd. purchased 30% of Yardley Co.s 50,000 outstanding common shares at a
Question:
On January 1, 2020, Santos Ltd. purchased 30% of Yardley Co.’s 50,000 outstanding common shares at a price of $20 per share. This price is based on Yardley’s net assets. On June 30, Yardley declared and paid a cash dividend of $60,000. On December 31, 2020, Yardley reported net income of $120,000 for the year. At this time, the shares had a fair value of $23. Santos’s year-end is December 31.
Required:
a. Assuming that Santos does not have any significant influence over Yarder, prepare all the 2020 entries relating to this investment using the FVTPL classification.
b. Prepare all the 2020 entries relating to this investment if it was classified as cost due to no active markets.
c. Prepare all the 2020 entries relating to this investment assuming that Santos has significant influence over Yarder. Santos uses the equity method of accounting.
Expert Answer:
Step 1 Journal entries are those entries which are recorded in the journal book at the time whenever a transaction take place FVTPL stands for fair value through profit and loss Given in the question ... View the full answer
