Sarnia Inc. acquired 15% of the 100,000 outstanding common shares of London Ltd. on January 1, 2018, for a cash consideration of $150,000 and a further 10% of the company's common shares a year later for $110,000. On July 1, 2019, Sarnia sold half their holding in London for proceeds of $150,000. London earned an income of $150,000 in 2018 and $180,000 in 2019 (evenly over both years) and paid a regular semi-annual dividend of $60,000 in June and December each year. Sarnia does not have significant influence over London and elected when it first acquired its initial investment in London to account for this investment through other comprehensive income. The company's shares wvere trading for $11 at the end of 2018 and $12 50 at the end of 2019
Sarnia Inc. acquired 15% of the 100,000 outstanding common shares of London Ltd. on January 1, 2018, for a cash consideration of $150,000 and a further 10% of the company's common shares a year later for $110,000. On July 1, 2019, Sarnia sold half their holding in London for proceeds of $150,000. London earned an income of $150,000 in 2018 and $180,000 in 2019 (evenly over both years) and paid a regular semi-annual dividend of $60,000 in June and December each year. Sarnia does not have significant influence over London and elected when it first acquired its initial investment in London to account for this investment through other comprehensive income. The company's shares wvere trading for $11 at the end of 2018 and $12 50 at the end of 2019
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Please include each step of calculation for my reference. Thanks a lot.
Transcribed Image Text:Sarnia Inc. acquired 15% of the 100,000 outstanding common shares of London Ltd. on January
1, 2018, for a cash consideration of $150,000 and a further 10% of the company's common
shares a year later for $110,000. On July 1, 2019, Sarnia sold half their holding in London for
proceeds of $150,000.
London earned an income of $150,000 in 2018 and $180,000 in 2019 (evenly over both years)
and paid a regular semi-annual dividend of $60,000 in June and December each year.
Sarnia does not have significant influence over London and elected when it first acquired its
initial investment in London to account for this investment through other comprehensive income.
The company's shares were trading for $11 at the end of 2018 and $12.50 at the end of 2019.
Required:
Prepare dated journal entries for Sarnia Inc for 2019 to account for its investment in London Ltd.
and any related income therefrom.
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