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 $106 million. Jackson Industry's net income for the year ended December 31, 2021, was $136 million. The fair value of the shares held by Sanborn was $130 million at December 31, 2021. During 2021, Jackson declared a dividend of $76 milion 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 rounded to 1 decimal place (ie, 5,500,000 should be entered as 5.5).) x Answer is 8 No General Jou Transaction 1 Credit Debit 106.0 Investment in equity securities Cash 106.0 2 © Dividend revenue Cash Cash Dividend revenue Fair value adjustment Gain on investment (unrealized, NI) of 10 Next >

Answer 1

Ans;

Account title	Debit($)	Credit($)
Investment in common Shares	106
Cash		106
(To record the purchase of securities)
No Journal entry for recording the net income
Cash	3.8
Investment revenu or Dividend Revenue		3.8
(To record the dividend received (3.8=76*5%))
Fair value adjustment(130-106)	24
Unrealised Holding gain and losses		24
( To record the change in fair value)
Investment revenue=3.8 millions
Since securities are AFS Securities therefore there will be no share in the net income declared by the investee company