ABC Company acquires a 10% ownership in XYZ Company on January 1, 2015. ABC Company does not have the ability to exert significant influence over XYZ. ABC properly records the Investment by using the fair-value method as an available-for-sale security. On January 1, 2017, ABC purchases another 30% of XYZ's outstanding shares, thereby achieving the ability to significantly influence XYZ's decisions. From 2015 through 2017, XYZ reports net income, declares and pays cash dividends and has fair values at Jan. 1 of each year as follows: Year Net income Cash Dividends Fair value at Jan. 1 2015 $1,000,000 2016 2,400,000 2017 3.000.000 200,000 600,000 800.000 $1,000,000 1,040,000 1.200.000
ABC Company acquires a 10% ownership in XYZ Company on January 1, 2015. ABC Company does not have the ability to exert significant influence over XYZ. ABC properly records the Investment by using the fair-value method as an available-for-sale security. On January 1, 2017, ABC purchases another 30% of XYZ's outstanding shares, thereby achieving the ability to significantly influence XYZ's decisions. From 2015 through 2017, XYZ reports net income, declares and pays cash dividends and has fair values at Jan. 1 of each year as follows: Year Net income Cash Dividends Fair value at Jan. 1 2015 $1,000,000 2016 2,400,000 2017 3.000.000 200,000 600,000 800.000 $1,000,000 1,040,000 1.200.000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:5) ABC Company acquires a 10% ownership in XYZ Company on January 1, 2015. ABC Company
does not have the ability to exert significant influence over XYZ. ABC properly records the
Investment by using the fair-value method as an available-for-sale security. On January 1, 2017,
ABC purchases another 30% of XYZ's outstanding shares, thereby achieving the ability to
significantly influence XYZ's decisions. From 2015 through 2017, XYZ reports net income,
declares and pays cash dividends and has fair values at Jan. 1 of each year as follows:
Year Net income Cash Dividends Fair value at Jan. 1
2015 $1,000,000 200,000
2016 2,400,000
600,000
2017 3,000,000 800,000
$1,000,000
1,040,000
1,200,000
Required:
Prepare all journal entries that should occur in ABC's records in 2017.
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