Chapter 9
Investments
446
AP-10A (
3
)
Candy Company purchased 25% of David Company’s 400,000 common shares outstanding,
on March 1, 2016. Candy Company paid $3.00 per share. Candy Company is considered to
have significant influence over David Company and applies the cost method for recording this
investment. Candy Company’s year-end is on December 31. The company follows ASPE.
Required
a) Prepare journal entries for the acquisition of David Company’s common shares by Candy
Company.
b) Prepare journal entries for the $15,000 dividends received from David Company on
December 31, 2016.
c) On January 1, 2017, Candy Company sold 5% of David Company’s common shares for
$5.00 per share. Prepare the journal entries for this transaction.
Date
Account Title and Explanation
Debit
Credit
