Question

On January 1, 2019, Lion Company paid $960,000 for 16,000 shares of Wolf Company's voting common stock, which was a 10% interest in Wolf. Lion does not have the ability to exercise significant influence over the operating and financial policies of Wolf. Lion received dividends of $1.00 per share from Wolf on October 2, 2019. Wolf reported net income of $450,000 for the year ended December 31, 2019, and the ending market price of its shares was $64.

On July 2, 2020, Lion paid $3,168,000 for 48,000 additional shares of Wolf's voting common stock, which represents a 30% investment in Wolf. The fair values of all of Wolf's assets, net of liabilities, were equal to their book values of $10,560,000. As a result of this transaction, Lion has the ability to exercise significant influence over the operating and financial policies of Wolf. Lion received dividends of $1.00 per share from Wolf on April 2, 2020, and $1.20 per share on October 1, 2020. Wolf reported net income of $550,000 for the year ended December 31, 2020, and $220,000 for the 6 months ended December 31, 2020.

Required:

1. For Lion, show the dividend income for 2019, as well as the December 31, 2019, unrealized holding gain or loss for the equity securities and carrying value of the investment account.

   Dividend income for 2019	$
   12/31/2019 unrealized holding gain for equity securities	$
   12/31/2019 carrying value of investment	$

2. Assuming that Lion issues comparative financial statements for 2019 and 2020, show the investment income for 2019 and 2020, as well as the December 31, 2019 and 2020 carrying value of the investment account

Answer 1

a)

Particulars	Dividend	No. of shares	Dividend Income
Dividend Income for 2019	1	16000	16000

b)

The unrealized gain on 31.12.2019 on holding shares
Investment	960000
Closing share price	64
No. of shares	16000
Closing value	1024000
The unrealized gain on 31.12.2019 on holding shares	64000

c) carrying value of the investment is $ 960000.