On May 15,Kingswood Company purchased 30% worth of Pineview Ltd.'s common shares as a significant influence investment.On September 30,Pineview announced that profit for the year amounted to $650,000.Kingswood should record a debit to Investment in Pineview Common Shares of $195,000 and a credit to Earnings from Investment in Pineview of $195,000.

Question

Quizplus · Accepted Answer

This is the correct accounting treatment for an investment in a significant influence investment. When Pineview announces a profit, Kingswood would record its share of the profit as earnings from the investment in Pineview. As Kingswood owns 30% of Pineview's common shares, it would record 30% of Pineview's profit, or $195,000.

On May 15,Kingswood Company Purchased 30% Worth of Pineview Ltd