Midterm Exam 2 Saved Help Save & Exit Submit 3 Fredo, Inc., purchased 10% of Son

Question

Midterm Exam 2 Saved Help Save & Exit Submit 3 Fredo, Inc., purchased 10% of Sonny Enterprises for $1,000,000 on January 1, 2018, Sonny recognized a total of $450,000 net income during 2018, paid $35,000 of dividends to Fredo during 2018, and at December 31, 2018, the market value of the Sonny investment increased to $1,045,000. Required Prepare the journal entries necessary to account for the Sonny investment, assuming that Fredo () lacks significant 01918 influence or (2) has significant influence over the operating and financial policies of the investee. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare the journal entries necessary to account for the Sonny investment, assuming that Fredo lacks significant infuence. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction listView journal entry worksheet No Transaction General Journal Debit Credit Investment in Sonny 1,000,000 Cash 1,000,000 2 Cash 2 35,000 Dividend revenue 35,000 ed 4 Fair value adjustment 450,000 Net unrealized holding gains and losses-OCI 450.000 ons pdt Mc Graw Hin

Explanation / Answer

Significant influence no Transaction General Journal Debit Credit 1) investment in Sonny 1,000,000 cash 1,000,000 2) investment in sonny 45000 investment income 45,000 (450,000*10%) 3) cash 35,000 investment in sonny 35,000 no entry for fair value adjustment

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