Chapter 1 Problem 10-8
a. 2004 Cash 400,000
Investment in equity securities 400,000
2005 Cash 400,000
Dividend income 100,000
Investment in equity securities 300,000
2006 Cash 400,000
Dividend income 150,000
Investment in equity securities 250,000
2007 Cash 400,000
Dividend income 200,000
Investment in equity securities (1,000,000 – 950,000) 50,000
Gain on investment 150,000
2008 Cash 400,000
Dividend income 250,000
Gain on investment 150,000
b. The investment account has been totally eliminated as of December 31, 2007 because
the liquidating dividends received exceed the cost of investment. Hence, there is no
more investment account to be reported in the December 31, 2008 statement of
financial position, but such fact should be disclosed in the notes to financial statements to the effect that the company is still the owner of 10,000 shares with a zero cost.
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