Reference no: EM132751852

Question - Charles Inc. purchased 30% of Nassar Corporation's 29,000 outstanding common shares at a cost of $15 per share on January 3, 2020. The purchase price of $15 per share was based solely on the book value of Nassar's net assets. On September 21, Nassar declared and paid a cash dividend of $37,800. On December 31, (Charles's year-end), Nassar reported net income of $82,000 for the year 2020. Nassar shares had a fair value of $14.75 per share at December 31st 2020. Charles Inc., is a private Canadian corporation and applies ASPE accounting rules to account for investment in shares.

Instructions -

1. Under the assumption that the 30% holding of Nassar does not give Charles significant influence over Nassar, prepare all required 2020 adjusting journal entries using the FV-NI method of accounting for temporary investments.

2. Under the assumption that the 30% holding DOES GIVE Charles significant influence over Nassar, repeat the above (give all required 2020 adjusting journal entries for Charles Inc.), using the equity basis accounting to account for the investment.