Spritz Company owns 15% of the stock of Turner Corporation. The investment was purchased for $200,000. At the beginning of 2020, it had a fair value of $230,000. At the end of 2020, its fair value is $250,000. Turner reported net income of $100,000 for 2020, and declared and paid cash dividends of $60,000. Spritz sells products to Turner at a markup of 20% on cost. Turner's ending inventory for 2020 included a balance of $10,800 for products purchased from Spritz.
Required
Prepare the journal entries Spritz makes in 2020 to record the above facts, assuming: a. Spritz treats its investment as an equity investment with no significant influence.
b. Spritz treats its investment as having significant influence and uses the equity method.

Question

Quizplus · Accepted Answer

The Answer of Spritz Company owns 15% of the stock of Turner Corporation. The investment was purchased for $200,000. At the beginning of 2020, it had a fair value of $230,000. At the end of 2020, its fair value is $250,000. Turner reported net income of $100,000 for 2020, and declared and paid cash dividends of $60,000. Spritz sells products to Turner at a markup of 20% on cost. Turner's ending inventory for 2020 included a balance of $10,800 for products purchased from Spritz.
Required
Prepare the journal entries Spritz makes in 2020 to record the above facts, assuming: a. Spritz treats its investment as an equity investment with no significant influence.
b. Spritz treats its investment as having significant influence and uses the equity method.

Spritz Company Owns 15% of the Stock of Turner Corporation