Equity Method for Stock Investment On January 4, Year 1, Ferguson Company purchased 105,000 shares of Silva Company directly from one of the founders for a price of $63 per share. Silva has 300,000 shares outstanding, including the Daniels shares. On July 2, Year 1, Silva paid $257,000 in total dividends to its shareholders. On December 31, Year 1, Silva reported a net income of $964,000 for the year. Ferguson uses the equity method in accounting for its investment in Silva. a. Provide the Ferguson Company journal entries for the transactions involving its investment in Silva Company during Year 1. Year 1, Jan. 4 Investment in Silva Company Stock 6,615,000 Cash 6,615,000 Cash Year 1, July 2 89,950 Investment in Silva Company Stock 89,950 Year 1, Dec. 31 Investment in Silva Company Stock 337,400 Income of Silva Company 337,400 b. Determine the December 31, Year 1, balance of Investment in Silva Company Stock.

Equity Method for Stock Investment On January 4, Year 1, Ferguson Company purchased 105,000 shares of Silva Company directly from one of the founders for a price of $63 per share. Silva has 300,000 shares outstanding, including the Daniels shares. On July 2, Year 1, Silva paid $257,000 in total dividends to its shareholders. On December 31, Year 1, Silva reported a net income of $964,000 for the year. Ferguson uses the equity method in accounting for its investment in Silva. a. Provide the Ferguson Company journal entries for the transactions involving its investment in Silva Company during Year 1. Year 1, Jan. 4 Investment in Silva Company Stock 6,615,000 Cash 6,615,000 Cash Year 1, July 2 89,950 Investment in Silva Company Stock 89,950 Year 1, Dec. 31 Investment in Silva Company Stock 337,400 Income of Silva Company 337,400 b. Determine the December 31, Year 1, balance of Investment in Silva Company Stock.

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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