Fredo,Inc. ,purchased 10% of Sonny Enterprises for $1,000,000 on January 1,2016.Sonny recognized a total of $400,000 net income during 2016,paid $30,000 of dividends to Fredo during 2016,and at December 31,2016,the market value of the Sonny investment increased to $1,040,000.
Required: Prepare the journal entries necessary to account for the Sonny investment,assuming that Fredo accounts for that investment as (1)an available-for-sale investment,and (2)elects the fair-value option.

Question

Quizplus · Accepted Answer

The Answer of Fredo,Inc. ,purchased 10% of Sonny Enterprises for $1,000,000 on January 1,2016.Sonny recognized a total of $400,000 net income during 2016,paid $30,000 of dividends to Fredo during 2016,and at December 31,2016,the market value of the Sonny investment increased to $1,040,000.
Required: Prepare the journal entries necessary to account for the Sonny investment,assuming that Fredo accounts for that investment as (1)an available-for-sale investment,and (2)elects the fair-value option.

Fredo,Inc ,Purchased 10% of Sonny Enterprises for $1,000,000 on January