As a long-term investment painters equipment company

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As a long-term investment, Painters' Equipment Company purchased 30% of AMC Supplies Inc.'s 300,000 shares for $630,000 at the beginning of the fiscal year of both companies. On the purchase date, the fair value and book value of AMC's net assets were equal. During the year, AMC earned net income of $280,000 and distributed cash dividends of 15 cents per share. At year-end, the fair value of the shares is $658,000.

Required:
1.

Assume no significant influence was acquired. Prepare the appropriate journal entries from the purchase through the end of the year. (If no entry is required for a particular event, select "No journal entry required" in the first account field.)

Event General Journal Debit Credit
1 Investment in AMC common shares


Cash

2 No journal entry required

3 Cash


Investment Revenue

4 Fair value adjustment


Net unrealized holding gains and losses - OCI

2.

Assume significant influence was acquired. Prepare the appropriate journal entries from the purchase through the end of the year. (If no entry is required for a particular event, select "No journal entry required" in the first account field.)

Event General Journal Debit Credit
1 Investment in AMC common shares


Cash

2 Investment in AMC common shares


Investment revenue

3 Cash


Investment in AMC common shares

4 No journal entry required

Reference no: EM13571186

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