Journal entries necessary to account for sonny investment

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Fredo, Inc purchased 10% of Sonny Enterprises for $1,000,000 on January 1, 2011. Sonny recognized a total of $400,000 of income during 2011, paid $30,000 of dividends to Fredo during 2011, and at December 31, 2011 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.

Reference no: EM13150476

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