Question

Required Information [The following information applies to the questions displayed below.) On January 2, 2021, Sanborn Tobacco Inc, bought 5% of Jackson Industry's capital stock for $90 million. Jackson Industry's net income for the year ended December 31, 2021, was $120 million. The fair value of the shares held by Sanborn was $98 million at December 31, 2021. During 2021, Jackson declared a dividend of $60 million Required: 1. Prepare all appropriate journal entries related to the investment during 2021. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

Answer 1

Solution:

Journal Entries - Sanborn Tobacco Inc. (In millions)
Event	Particulars	Debit	Credit
1	Equity investment Dr	$90.00
	To Cash		$90.00
	(To record investment in Jackson)
2	No journal entry required
3	Fair value adjustment Dr	$8.00
	To Unrealized holding gain or loss - OCI		$8.00
	(To record fair value adjustment)
4	Dividend receivables Dr	$3.00
	To Dividend revenue		$3.00
	(To record dividend revenue)