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Fredo, Inc., purchased 10% of Sonny Enterprises for $1,000,000 on January 1, 2018. Sonny recognized a...

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Accounting

Fredo, Inc., purchased 10% of Sonny Enterprises for $1,000,000on January 1, 2018. Sonny recognized a total of $400,000 net incomeduring 2018, paid $30,000 of dividends to Fredo during 2018, and atDecember 31, 2018, the market value of the Sonny investmentincreased to $1,040,000.

Required: Prepare the journal entries necessaryto account for the Sonny investment, assuming that Fredo:

(1) Lacks significant influence

(2) Assume that with the 10% purchase Fredo has significantinfluence over the operating and financial policies of theinvestee.

Answer & Explanation Solved by verified expert
4.1 Ratings (561 Votes)
Date Account Titles and Explanation Debit Credit 1 Investment in Sonny Common Stock 100000000 Cash 100000000 record the purchase o Sonny Common Stock 2    See Answer
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