Reference no: EM132944517
Question - Chatim Corporation acquired 20,000 of the 100,000 outstanding common shares of Topsoil & Landscape Supplies Ltd. on January 1, 2018, for a cash consideration of $200,000. During 2018, Topsoil & Landscape Supplies Ltd. had a net income of $120,000 and paid dividends of $80,000. At the end of 2018, shares of Topsoil & Landscape Supplies Ltd. were trading for $11 each.
During 2019, Topsoil & Landscape Supplies Ltd. had a loss of $60,000 and paid dividends of $40,000. Income for the first half of the year was $80,000 and the loss in the second half of the year was $140,000. The dividends were paid on June 30. On July 2, 2019, Chatim Corporation sold 5,000 shares of Topsoil & Landscape Supplies Ltd. for a consideration of $12 per share. At the end of 2019, the share price of Topsoil & Landscape Supplies Ltd. had fallen to $6 per share. The average of market analysts' forecasts was that the share price could be expected to rise to $8 per share over the next five years. (Assume that the future recoverable value of the shares is assessed to be $8 per share.)
Required - Create journal entries for Chatim Corporation for all transactions relating to its investment in Topsoil & Landscape Supplies Ltd. for the year 2019 if it accounts for its investment in Topsoil & Landscape Supplies Ltd. using the equity method.