On January 1, year 3, Belmont enterprises obtained 10,000 (15%) of the shares of Candy Inc. for
Question:
On January 1, year 3, Belmont enterprises obtained 10,000 (15%) of the shares of Candy Inc. for $280,000. During year 3 Candy reported net income of $145,000 and paid dividends of $40,000. The market price of Candy’s shares was $30 at the end of year 3.
Belmont was pleased with the investment in Candy and obtained another 20% of the shares of Candy Inc. on January 1, year 4 for $400,000. This new investment gives Belmont significant influence over Candy. Candy reported net income of $180,000 in year 4 and paid dividends of $50,000. The market price of Candy’s shares at the end of year 4 was $31. Belmont sold the investment in Candy’s shares on January 2, year 5 for $31 each.
Required:
- Prepare all journal entries required for years 3, 4 and 5.
- Provide the balance of the investment account at the end of year 3 and 4.
Intermediate Accounting
ISBN: 978-0324659139
11th edition
Authors: Loren A. Nikolai, John D. Bazley, Jefferson P. Jones