On January 4, 20Y6, Spandella Company purchased 84,000 shares of Filington Company directly from one of...
On January 4, 20Y6, Spandella Company purchased 84,000 shares of Filington Company directly from one of the founders for a price of $38 per share. Filington has 300,000 shares outstanding, including the Spandella shares. On July 2, 20Y6, Filington paid $244,000 in total dividends to its shareholders. On December 31, 20Y6, Filington reported a net income of $755,000 for the year. Spandella uses the equity method in accounting for its investment in Filington.
a. Journalize the Spandella Inc. entries for the transactions involving its investment in Filington Company during 20Y6.
| 20Y6 Jan. 4 | |||
| 20Y6 July 2 | |||
| 20Y6 Dec. 31 | |||
b. Determine the December 31, 20Y6, balance of
the investment in Filington Company stock account.
Homework Answers
| percentage share =84000/300000= | 28% | ||||||||
| a) | Date | Account titles and Explanations | debit | Credit | |||||
| 4-Jan | investment in Flington company | 3192000 | |||||||
| cash | 3192000 | ||||||||
| (84000*38) | |||||||||
| 2-Jul | Cash | 68320 | |||||||
| investment in Flington company | 68,320 | ||||||||
| (244,000*28%) | |||||||||
| 31-Dec | Investment in Flington company | 211400 | |||||||
| investment income | 211,400 | ||||||||
| (755000*28%) | |||||||||
| b) | Investment in Flington company stock account | 3335080 | |||||||
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