Equity Method for Stock Investment On January 4, Year 1, Ferguson Company purchased 100,000 shares of Silva Company directly from one of the founders for a price of $49 per share. Silva has 400,000 shares outstanding, including the Daniels shares. On July 2, Year 1, Silva paid $245,000 in total dividends to its shareholders. On December 31, Year 1, Silva reported a net income of $918,000 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 fill in the blank 0c78f7040f9f058_2 Cash fill in the blank 0c78f7040f9f058_4 Year 1, July 2 fill in the blank 0c78f7040f9f058_6 fill in the blank 0c78f7040f9f058_8 Year 1, Dec. 31 fill in the blank 0c78f7040f9f058_10 fill in the blank 0c78f7040f9f058_12 Feedback a. Jan 4: Record the investment at cost. July 2: Calculate the ownership percentage. Under the equity method of accounting for investments, the dividends earned affect the investment account. Dec. 31: Calculate the ownership percentage. Under the equity method of accounting for investments, the share of income affects the investment account. b. Determine the December 31, Year 1, balance of Investment in Silva Company Stock. $fill in the blank 4c93cef7b02707e_1
Equity Method for Stock Investment On January 4, Year 1, Ferguson Company purchased 100,000 shares of Silva Company directly from one of the founders for a price of $49 per share. Silva has 400,000 shares outstanding, including the Daniels shares. On July 2, Year 1, Silva paid $245,000 in total dividends to its shareholders. On December 31, Year 1, Silva reported a net income of $918,000 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 fill in the blank 0c78f7040f9f058_2 Cash fill in the blank 0c78f7040f9f058_4 Year 1, July 2 fill in the blank 0c78f7040f9f058_6 fill in the blank 0c78f7040f9f058_8 Year 1, Dec. 31 fill in the blank 0c78f7040f9f058_10 fill in the blank 0c78f7040f9f058_12 Feedback a. Jan 4: Record the investment at cost. July 2: Calculate the ownership percentage. Under the equity method of accounting for investments, the dividends earned affect the investment account. Dec. 31: Calculate the ownership percentage. Under the equity method of accounting for investments, the share of income affects the investment account. b. Determine the December 31, Year 1, balance of Investment in Silva Company Stock. $fill in the blank 4c93cef7b02707e_1
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Equity Method for Stock Investment
On January 4, Year 1, Ferguson Company purchased 100,000 shares of Silva Company directly from one of the founders for a price of $49 per share. Silva has 400,000 shares outstanding, including the Daniels shares. On July 2, Year 1, Silva paid $245,000 in total dividends to its shareholders. On December 31, Year 1, Silva reported a net income of $918,000 for the year. Ferguson uses the equity method in accounting for its investment in Silva.
a. Provide the Ferguson Company
| Year 1, Jan. 4 | Investment in Silva Company Stock | fill in the blank 0c78f7040f9f058_2 | |
| Cash | fill in the blank 0c78f7040f9f058_4 | ||
| Year 1, July 2 | fill in the blank 0c78f7040f9f058_6 | ||
| fill in the blank 0c78f7040f9f058_8 | |||
| Year 1, Dec. 31 | fill in the blank 0c78f7040f9f058_10 | ||
| fill in the blank 0c78f7040f9f058_12 |
a.
Jan 4: Record the investment at cost.
July 2: Calculate the ownership percentage. Under the equity method of accounting for investments, the dividends earned affect the investment account.
Dec. 31: Calculate the ownership percentage. Under the equity method of accounting for investments, the share of income affects the investment account.
b. Determine the December 31, Year 1, balance of Investment in Silva Company Stock.
$fill in the blank 4c93cef7b02707e_1
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