Question

year end S DILI Problem 16-2A The balance sheet of Spottified Corp. recently included: Investments in significantly influenced and other companies $2,500,000 Spottified Corp. included its short-term investments among the current assets; the invest- ments described above were long-term. Assume the company completed the following investment transactions during 2017: Mar. 3 Purchased 8,000 common shares as a short-term investment, paying $25.00 per share plus brokerage commission of $500. Purchased additional shares in a company that is significantly influenced by Spottified Corp. at a cost of $600,000 plus brokerage commission of $4,500. May 14 Received semi-annual cash dividend of $1.70 per share on the short-term investment purchased March 3. Jun. 15 Received cash dividend of $55,000 from a significantly influenced company. Aug. 28 Sold the short-term investment (purchased on March 3) for $24.00 per share, less brokerage commission of $500. Oct. 24 Purchased other short-term investments for $275,000, plus brokerage com- mission of $400. Dec. 15 Received cash dividend of $30,000 from a significantly influenced company. 31 Received annual reports from significantly influenced companies. Their total net income for the year was $1,300,000. Of this amount, Spottified Corp.'s proportion is 30 percent. Required 1. Record the transactions in the general journal of Spottified Corp. 2. Post entries to the Investments in Significantly influenced and Other Companies T-account, and determine its balance at December 31, 2017 3. Assume the beginning balance of Short-Term Investments was at a cost of $250,000. Post entries to the Short-Term Investments T-account and determine its balance at December 31, 2017. 4. Assuming the market value of the short-term investment portfolio is $510,000 at December 31, 2017, show how Spottified Corp. would report short-term investments and investments in significantly influenced and other companies on the December 31, 2017, balance sheet. Use the followine format:

Answer 1

Answer -1
In the books of Spottified Corp.
Journal Entries
Date	Description	Debit	Credit
Mar-03	Short term Investment (8000*25+500)	$         2,00,500
	Cash
	(being short term investment purchased)
Mar-04	Investments in significantly influenced and other companies	$         6,04,500
	Cash		$      6,04,500
	(being investments purchased)
May-14	Cash (8000*1.7)	$            13,600
	Dividend Income		$          13,600
	(being cash dividend received on short term Investments)
Jun-15	Cash	$            55,000
	Investments in significantly infulenced and other companies		$          55,000
	(being dividend received)
Aug-28	Cash (8000*24-500)	$         1,91,500
	Loss on sale of short term investment	$              9,000
	Short term investment		$      2,00,500
	(being short term investment sold)
Oct-24	Short term Investment (275000-400)	$         2,74,600
	Cash
	(being short term investment purchased)
Dec-15	Cash	$            30,000
	Investments in significantly influenced and other companies		$          30,000
	(being dividend received)
Dec-31	Investments in significantly influenced and other companies	$         3,90,000
	Share of Income in Associate (1300000*30%)		$      3,90,000
Answer -2
Investments in significantly influenced and other companies
Date	Description	Amount in $	Date	Description	Amount in $
2017			2017
	Opening Balance	25,00,000	Jun-15	Cash	55,000
			Dec-15	Cash	30,000
Dec-31	Share of Income in Associate (1300000*30%)	3,90,000	Dec-31	Closing Balance	28,05,000
		28,90,000			28,90,000
Answer -3
Short term Investment
Date	Description	Amount in $	Date	Description	Amount in $
	Opening Balance	2,50,000	Aug-28	Cash	1,91,500
Mar-03	Cash	2,00,500	Aug-28	Loss on sale	9,000
			Dec-31	Closing Balance	2,50,000
		4,50,500			4,50,500
Answer to 4-
Journal entry for recording short term investment to fair value
	Account title	Debit	Credit
	Short term investment Fair value adjustment (510000-250000)	$         2,60,000
	Unrealised gain on short term investment		$      2,60,000
	(being trading securities brought to its market value of $5,10,000)
Balance Sheet of Spottified Corp as at dec 31, 2017
Particulars		Amount
Assets-
Long term assets-
Investments in significantly influenced and other companies		$       28,05,000
Current Assets
Short term investment		$        5,10,000