Make journal entries on P Ltd books

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Question - On January 1, 2020, P Ltd purchased 10% of the outstanding 1,000,000 common shares of Sunk for $200,000. P considers this investment to be a non-strategic investment. At the December 31, 2020 year end, the fair value of this investment was $208,000. Sunk's profit in 2020 was $100,000. Sunk paid a dividend of $.60 per common share. On January 1, 2021, P decided to buy an additional 25% of Sunk's 1,000,000 common shares for $500,000. This second purchase allowed P to significantly influence Sunk. In 2021, Sunk's profit was $140,000. Sunk paid dividends of $.50 per common share in 2021.

Required - Make journal entries for 2020 and 2021 on P Ltd's books with respect to the Investment in Sunk.

Reference no: EM133018436

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