Record journal entries in the order presented in the problem

Record journal entries in the order presented in the problem.

Tamarisk Inc acquired 102,000 common shares, which is 25% of the outstanding common shares, of Tahiti Ltd. on January 1, 2017 for $606,900. At the time of purchase, Tahiti Ltd. depreciable assets were undervalued by $33,600. The depreciable assets had a remaining useful life of 8 years with no salvage value. Tahiti Ltd. declared and paid a cash dividend of $0.33 per share on July 31, 2017. Tahiti Ltd. reported $1.2 million as net income on December 31, 2017 for the year ending on this date. Assuming that Tamarisk Inc. is in a position to exercise significant influence over Tahiti Ltd, and that Tamarisk follows IFRS. Prepare all the journal entries for 2017 in the books of Tamarisk Inc. relating to above transactions. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.

Date Account Titles and Explanation Credit (To record investment income earned.) (To record amortization of undervalued assets.) Calculate the balance in Tamarisk\'s \"Investment in Tahiti: account at December 31, 2017.\' Investment in Tahiti

Solution

Please hit LIKE button if this helped. For any further explanation, please put your query in comment, will get back to you. Date Account Debit Credit Jan 1 2017 Investment in Tahiti Ltd 606900 Cash 606900 (to record initial investment) July 31 2017 Cash 33660 102000*0.33 Investment in Tahiti Ltd 33660 (to record receipt of cash dividend) Dec 31 2017 Investment in Tahiti Ltd 300000 1200000*25% Equity income in Tahiti 300000 (to record investment income earned) Dec 31 2017 Amortization Expense 1050 (33600*25%)/8 Investment in Tahiti Ltd 1050 (To record the amortization Expense) Initital Investment 606900 Less: Cash Dividend -33660 Add: Income 300000 Less: Amortization Exp -1050 Ending Balance 872190