Question

instructions On January 4, Year 1, Ferguson Company purchased 192,400 shares of Siva Company directly from one of the founders for a price of $35 per share. Silva has 520,000 shares outstanding, including the Daniels shares. On July 2, Year 1. Silva paid $683,000 in total dividends to its shareholders. On December 31, Year 1, Silva reported a net income of $1,007,000 for the year. Ferguson uses the equity method in accounting for its investment in Silva Required: A Provide the Ferguson Company journal entries for the transactions involving its investment in Silva Company during Year 1. Refer to the Chart of Accounts for exact wording of account titles. B. Determine the December 31, Year 1, balance of the investment in Siva Company stock account.

Answer 1

Solution 1:

Journal Entries
S. no.	Date	Account title and explanation	Debit	Credit
1)	04-Jan	Investment in Silve company stock Dr (192400*$35)	$67,34,000
		To Cash		$67,34,000
2)	02-Jul	Cash Dr ($683000*37%)	$2,52,710
		To Investment in Silva Compamy stock		$2,52,710
3)	31-Dec	Investment in Silva company stock Dr ($1,007,000*37%)	$3,72,590
		To Income of Silva company		$3,72,590

Solution 2:

Balance of Investment = $6734000 - 252710 + 372590 = $6,853,880