Company P purchased 70% stock in Company S on Jan 1, 20X1 for S170,000. For the year 20X1, Company S reported a net income of $100,000 and paid dividends of $40,000. At year-end, investment account in the books of Company P had a fair market value of $175,000. Under the fair value method, The unrealized loss will be credited with $25,000. The unrealized loss will be debited with $25,000. The unrealized gain will be credited with $5000. The extraordinary loss will be debited with $25,000.

Company P purchased 70% stock in Company S on Jan 1, 20X1 for S170,000. For the year 20X1, Company S reported a net income of $100,000 and paid dividends of $40,000. At year-end, investment account in the books of Company P had a fair market value of $175,000. Under the fair value method, The unrealized loss will be credited with $25,000. The unrealized loss will be debited with $25,000. The unrealized gain will be credited with $5000. The extraordinary loss will be debited with $25,000.

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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