Question

Required Information [The following information applies to the questions displayed below.] On January 2, 2021, Sanborn Tobacco Inc. bought 10% of Jackson Industry's capital stock for $91 million. Jackson Industry's net Income for the year ended December 31, 2021, was $121 million. The fair value of the shares held by Sanborn was $100 million at December 31, 2021. During 2021, Jackson declared a dividend of $61 million. 2. Assume that Sanborn sold the stock on January 2, 2022 for $112 million. Prepare the journal entries Sanborn would use to record the sale. (If no entry is required for a transaction/event, select "No Journal entry required" In the first account field. Enter your answers in millions rounded to 1 decimal place (I.e., 5,500,000 should be entered as 5.5).)

JOURNAL ENTRY:

1) Record the entry to adjust to fair value on the date of sale.

2) Record the sale of stock on January 2, 2022 for $112 million.

Answer 1

Credit Debit $ 12 Transaction General Journal 1 Fair value adjustment Unrealized holding gain - NI (To record fair value on the date of sale) $ 12 2 $ $ 112 91 Cash Investment in Jackson Industry shares Fair Value adjustment (To record sale of stock) $ $ 21 1 Working Notes: Fair value adjustment = $112-$100 = $12 Fair value adjustment = $112-$91 = $21 2