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What is the balance in the investment account

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Question - Choco acquired 10 % of the voting common stock of Cake Company in 1/1/2019 by paying $12,000 in cash. Choco uses the fair value method to account for its investment and recorded as available for sales security. Cake Company has the book value of net assets of $100,000. During 2019, Cake had a net income of $85,000, paid dividends of $60,000. The fair market value of Cake in 1/1/2019 was $120,000 and in 12/31/2019, it was $132,000.

Required -

1) What is the journal entry regarding net income earned by Cake in 12/31/2019?

2) What is the journal entry regarding dividends paid by Cake in 12/31/2019?

3) What is the journal entry regarding changes in fair value of Cake in 12/31/2019?

4) What is the balance in the investment account as of 12/31/2019?

Reference no: EM132635202

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