On January 2, 2018, Sanborn Tobacco Inc. bought 5% of Jackson Industrys capital stock for...
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Accounting
On January 2, 2018, Sanborn Tobacco Inc. bought 5% of Jackson Industrys capital stock for $96 million. Jackson Industrys net income for the year ended December 31, 2018, was $126 million. The fair value of the shares held by Sanborn was $110 million at December 31, 2018. During 2018, Jackson declared a dividend of $66 million. Required: 1. Prepare all appropriate journal entries related to the investment during 2018. 2. Assume that Sanborn sold the stock on January 2, 2019 for $122 million. Prepare the journal entries Sanborn would use to record the sale.
requirement 1)
journal entry
1) Record the purchase of Jackson Industry capital stock for $96.
2) Record Sanborn Tobacco's portion of Jackson Industry's net income of $126 million.
3) Record the cash dividend of $3.3 million
4) Record any necessary entry to adjust the fair value on December 31, 2018.
requirement 2)
journal entry
1) Record the entry to adjust to fair value on the date of sale
2) Record the sale of stock on January 2, 2019 for $122 million.
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