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Assume that Pam company purchased a 25% interest of Sin Company for $1,000,000 on 1/1/X1. At the time, Sin Company's equity included $2 million of capital stock and $2 million of retained earnings. During year X1, Sin reported a $500,000 income in year X1 and $400,000 income in year X2. Sin paid $200,000 of dividends per year in X1 and X2. Assume that, during the audit of Sin's year X1 financial statements, the auditor discovered that Pam's investment in Sin was valued at $1,000,000 on 12/31/X2. As the auditor, what entries should Pam make to correct the problem

Assume that Pam company purchased a 25% interest of Sin Company for $1,000,000 on 1/1/X1. At the time, Sin Company's equity included $2 million of capital stock and $2 million of retained earnings. During year X1, Sin reported a $500,000 income in year X1 and $400,000 income in year X2. Sin paid $200,000 of dividends per year in X1 and X2. Assume that, during the audit of Sin's year X1 financial statements, the auditor discovered that Pam's investment in Sin was valued at $1,000,000 on 12/31/X2. As the auditor, what entries should Pam make to correct the problem

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Assume that Pam company purchased a 25% interest of Sin Company for $1,000,000 on 1/1/X1. At the time, Sin Company's equity included $2 million of capital stock and $2 million of retained earnings. During year X1, Sin reported a $500,000 income in year X1 and $400,000 income in year X2. Sin paid $200,000 of dividends per year in X1 and X2. Assume that, during the audit of Sin's year X1 financial statements, the auditor discovered that Pam's investment in Sin was valued at $1,000,000 on 12/31/X2.

As the auditor, what entries should Pam make to correct the problem.

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