Reference no: EM132472017
RR Company purchased 12,000 common shares of SS Inc. on January 1, Year 1 for $198,000. SS inc. had 80,000 common shares outstanding. The following information relates to SS Inc.:
Net Income (loss) Dividends paid Market value/share at December 31
Year 1 $300,000 $75,000 $17.25
Year 2 $(180,000) $40.000 $18.30
On January 1, Year 3, RR sold Investment in SS Inc. shares for $20 per share.
Required: Show all calculations for full marks
Question i) Prepare the journal entries for years 1, 2 and on January 1, year 3 assuming the following independent scenarios:
a) Investor plans to sell the shares in the short term for profit
b) Elect to use FVTOCI (include closing journal entry on January 1 Year 3)
c) Investor has significant influence
Question ii) How much is the total change in Retained Earnings from January 1, Year 1 to January 1, Year 3 for each scenario? Show all #s for each year to support your total change