Orlov Corporation purchased 22,000 shares of Matsey Corporation common stock for $40 per share on January 1,2009.Matsey reported net income of $120,000 for 2009 and paid dividends of $45,000 during 2009.As of December 31,2009,the market value of Matsey Corporation common stock was $39 per share.Assuming the shares owned by Orlov represent 10 percent of the total outstanding stock of Matsey,the year end adjustment entry in Orlov Corporation's books is:

Question

Quizplus · Accepted Answer

Since Orlov Corporation owns less than 20% of Matsey Corporation, it should use the fair value method. The market value decreased from $40 to $39 per share, resulting in an unrealized loss of $22,000 (22,000 shares x $1 loss per share).

Orlov Corporation Purchased 22,000 Shares of Matsey Corporation Common Stock Cash 22,000 Dividend Income22,000\begin{array}{llr} \text { Cash } &22,000\\ \text { Dividend Income} &&22,000\\\end{array} Cash Dividend Income​22,000​22,000​

Orlov Corporation Purchased 22,000 Shares of Matsey Corporation Common Stock $\begin{array}{llr} \text { Cash } &22,000\\ \text { Dividend Income} &&22,000\\\end{array}$