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 of the stock decreased from $40 to $39, resulting in an unrealized loss of $1 per share. For 22,000 shares, this is a $22,000 unrealized loss, which is recorded as an adjustment to market value.

Orlov Corporation Purchased 22,000 Shares of Matsey Corporation Common Stock Cash22,000 Dividend Income 22,000\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 $\begin{array}{llr} \text { Cash} &22,000\\ \text { Dividend Income } &&22,000\\\end{array}$