On July 1, 2020, Roberts Corp., a public company, purchased as a long-term investment 20% of the common shares of Ellison Inc. for $ 340,000. Both of the companies have June 30 year ends. For the year ended June 30, 2021, Ellison reported profit of $ 225,000 and paid total dividends of $ 80,000 on April 30, 2021. The market price of the shares of Ellison was $ 350,000.
Instructions
a) Assuming that 20% ownership does not give Roberts significant influence over Ellison, and that the company chooses to report gains/losses resulting from the fair value adjustments in other comprehensive income:
i) Record the purchase of the shares.
ii) Prepare any other entries that Roberts will record during the year ended June 30, 2021 related to its investment in Ellison.
iii) Determine what amounts will be reported in Roberts' June 30 2021 balance sheet, income statement and/or comprehensive statement related to its investment in Ellison.
b) Assuming that 20% ownership provides Roberts with significant influence over Ellison:
i) Record the purchase of the shares.
ii) Prepare any other entries that Roberts will record during the year ended June 30, 2021 related to its investment in Ellison.
iii) Determine what amounts will be reported in Roberts' June 30 2021 balance sheet and income statement related to its investment in Ellison.

Question

Quizplus · Accepted Answer

The Answer of On July 1, 2020, Roberts Corp., a public company, purchased as a long-term investment 20% of the common shares of Ellison Inc. for $ 340,000. Both of the companies have June 30 year ends. For the year ended June 30, 2021, Ellison reported profit of $ 225,000 and paid total dividends of $ 80,000 on April 30, 2021. The market price of the shares of Ellison was $ 350,000.
Instructions
a) Assuming that 20% ownership does not give Roberts significant influence over Ellison, and that the company chooses to report gains/losses resulting from the fair value adjustments in other comprehensive income:
i) Record the purchase of the shares.
ii) Prepare any other entries that Roberts will record during the year ended June 30, 2021 related to its investment in Ellison.
iii) Determine what amounts will be reported in Roberts' June 30 2021 balance sheet, income statement and/or comprehensive statement related to its investment in Ellison.
b) Assuming that 20% ownership provides Roberts with significant influence over Ellison:
i) Record the purchase of the shares.
ii) Prepare any other entries that Roberts will record during the year ended June 30, 2021 related to its investment in Ellison.
iii) Determine what amounts will be reported in Roberts' June 30 2021 balance sheet and income statement related to its investment in Ellison.