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Chapter 13: 10IFRS (page 658)

Fairbanks Corporation purchased 400 ordinary shares of Sherman Inc. as a trading investment for \(13,200. During the year, Sherman paid a cash dividend of \)3.25 per share. At year-end, Sherman shares were selling for $34.50 per share. Prepare Fairbanks鈥� journal entries to record (a) the purchase of the investment, (b) the dividends received, and (c) the fair value adjustment

Short Answer

Expert verified

Trading investment debited by $13,200 and cash credited by $13,200. Cash debited by $1,300 and dividend revenue credited by $1,300. Fair value investment debited by $600 and unrealized holding gain or loss-income credited by $600.

Step by step solution

01

Entry for the purchase of investment

Date

Particulars

Debit

Credit

Trading Investment

$13,200

Cash

$13,200

(Being entry for the purchase of trading investment)

02

Dividend revenue entry

Date

Particulars

Debit

Credit

Cash

$1,300

Dividend Revenue

$1,300

(Being entry for the dividend revenue)

03

Fair adjustment entry

Date

Particulars

Debit

Credit

Fair Value Investment

$600

Unrealized Holding Gain or Loss- Income

$600

(Being entry for the fair value adjustment)

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