Homework SourseInvestments in Common Stock Both Seco Inc and Hillsborough C
Investments in Common Stock
Both Seco Inc. and Hillsborough Corp. have 100,000 shares of no-par common stock outstanding. World Inc. acquired 10,000 shares of Seco stock for $6 per share and 30,000 shares of Hillsborough stock for $12 per share in 2012. Both securities are being held as long-term investments. Changes in retained earnings for Seco and Hillsborough for 2012 and 2013 are as follows:
Give the entries required on the books of World Inc. for 2012 and 2013 to account for its investments.
2012
To record dividend received from Seco Inc.
To record share of Hillsborough Corp. income.
To record change in value of Seco Inc. Securities
2013
To record dividend received from Seco Inc.
To record dividend received from Hillsborough Corp.
To record share of Hillsborough Corp. income.
To record change in fair value of Seco inc. Securities
Give the entries required on the books of World Inc. for 2012 and 2013 to account for its investments.
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Solution
Solution:
| Journal Entries - World Inc. | |||
| Year | Particulars | Debit | Credit |
| 2012 | Cash Dr | $3,750.00 | |
| To Dividend revenue | $3,750.00 | ||
| (To record dividend received from Seco Inc.) | |||
| 2012 | Investment in Hillsborough Corp Dr | $21,000.00 | |
| To Investment Income | $21,000.00 | ||
| (To record share of Hillsborough Corp. income.) | |||
| 2012 | Fair value adjstment Dr | $15,000.00 | |
| To Unrealized holding gain or loss - OCI | $15,000.00 | ||
| (To record change in value of Seco Inc. Securities) | |||
| 2013 | Cash Dr | $4,500.00 | |
| To Dividend revenue | $4,500.00 | ||
| (To record dividend received from Seco Inc.) | |||
| 2013 | Cash Dr | $6,000.00 | |
| To Investment in Hillsborough Corp | $6,000.00 | ||
| (To record dividend received from Hillsborough Corp) | |||
| 2013 | Investment in Hillsborough Corp Dr | $12,000.00 | |
| To Investment Income | $12,000.00 | ||
| (To record share of Hillsborough Corp. income.) | |||
| 2013 | Unrealized holding gain or loss Dr | $10,000.00 | |
| To Fair value adjustment | $10,000.00 | ||
| (To record change in fair value of Seco Inc. Securities) |
