On January 1 2017 Donner Co purchased 3000 shares representi

On January 1, 2017, Donner Co. purchased 3,000 shares, representing 30% of Ishwar Limited, for $390,000. Donner is a publicly traded company. Ishwar\'s total net income was $86,000 for the year ended December 31, 2017. Ishwar also paid dividends in total of $25,000 during 2017. At the year end, each share of Ishwar was trading at $150 per share.

Show the journal entries that Donner would have used to report its original purchase and any related investment income for Ishwar for 2017 assuming that Donner reports its investment in Ishwar using FVTPL. What is the investment account balance at the end of December 31, 2017?

Solution

Journal Entry in the Books of Donner Co.

Date

Detail

Debit

Credit

01 Jan 17

Investment In Ishwar Ltd

390000

      Cash

390000

( 3000 share represent 30%, in Ishwar Ltd. Purchase)

31 Dec 17

Investment In Ishwar Ltd

25800

      Share in income of Associate

25800

( 30% of $86000 share, in Proft of Ishwar Ltd.)

31 Dec 17

Cash

7500

   Investment in Iswar Ltd.

7500

( Dividend received , 30% of $25000)