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Milani, Inc., acquired 10 percent of Seida Corporation on January 1, 2017, for $190,000 and appropriately accounted for the investment using the fair-value method. On January 1, 2018, Milani purchased an additional 30 percent of Seida for $600,000 which resulted in significant influence over Seida. On that date, the fair value of Seida’s common stock was $2,000,000 in total. Seida’s January 1, 2018, book value equaled $1,850,000, although land was undervalued by $120,000. Any additional excess fair value over Seida’s book value was attributable to a trademark with an 8-year remaining life. During 2018, Seida reported income of $300,000 and declared and paid dividends of $110,000. Prepare the 2018 journal entries for Milani related to its investment in Seida.

Parta. Equity income-2017 Basic equity (income) accrual Amortization Equity income-2017 Equity income-2018 Basic equity (inco

x 40% 2017 intra-entity gross profit to be recognized in 2018 Ending inventory Gross profit percentage Intra-entity gross pro

business   accounting   
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Answer #1
Date Journal Debit Credit
January 1, 2017 Available for sale securities $190,000
to cash $190,000
January 1, 2018 Available for sale securities $600,000
to cash $600,000
December 31, 2018 Cash ($11000* 40%) $44000
to Dividend Revenue $44000
  • There is no entry required to show profit declared by Seida.
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