Question

On January 1, 2018, Bryant, Ine. decides to invest in 3,750 shares of Farrier stock when the stock is seling for $16 per share. On August 1, 2016, Famrier paid a $070 per share cash dividend to stockholders. On December 31, 2018, Famier reports net income of $50,000 for 2018. Assume Farrier has 15,000 shares of voting stock outstanding during 20168 and Bryant hes significant influence over Famer Read the requirements nequired, select "No entry required" on the first line of the Accounts and Explanation colunn and leave the remaining cells blank) January 1: Bryant, Inc. decides to invest in 3,750 shares of Farier stock when the stock is seling for $16 per share. Accounts and Explanation Date Debit Credit Requirements Equity Investments-Farier 60,000 Jan. 1 60,000 Cash 1. Identify what type of investment the Farier stock is for Bryant 2. Jounalze the transactions related to Bryants investment in the Famier stock duing 2018 3. In what calegory and at what value would Bryant's report the invesiment on the December 31, 2018, balance sheetn Purchased investment in stock (equity method) August 1: Farrer paid a $0.70 per share cash dividend to stockholders Debit Credit Date Accounts and Explanation Print Done Dividend Revenue Aug 1 Cash

Answer 1

SOLUTION : A
		CALCULATION OF INVESTMENT % IN EQUITY INVESTMENT
		No. of Shares outsanding in Farrier Co,	15,000	Shares
		No. of Shares acquired =	3,750	Shares
		% of Holding = 3,750 Shares / 15,000 Shares =	25%
		When investment in any organization in equity is more than 20% of total equity than we have to follow equity
		method of investment
		Answer = Type of investment = Equity
SOLUTION : B
	Date	General Journal	Debit	Credit
	January , 01	Equity Investment - Farrier	$60,000
		Cash		$60,000
		(Investment in cash in equity of Farrier)
	Aug, 01	Cash ( 3,750 Shares X $ 0.70)	$2,625
		Equity Investment - Farrier		$2,625
		(Share of Dividned Declared )
	Dec , 31	Equity Investment - Farrier ($ 50,000 X 25%)	$12,500
		Investment Revenue		$12,500
		(Share of net income )
SOLUTION : C
		This can be shown in Assets side as Investment in Equity
		CALCULATION OF VALUE OF INVESTMENT'
		Inintial investment value =	$60,000
		Less: Dividend Received	$2,625
		Add: Net income reported in balance sheet	$12,500
		Balance at year end	$69,875
		Answer = Value of investment shown in balance sheet = $ 69,875