X Purchased 40% of Y on January 1, 2016 for $400,000

question 11

Essay

X purchased 40% of Y on January 1, 2016 for $400,000. Y paid dividends of $50,000 in each year. Y's income statements for 2016 and 2017 showed the following. $$\begin{array} { | l | l | } \hline & 2016 \\\hline \text { Income (loss) betore income taxes } &\$100,000 \\\hline \text { Income tax expense (recovery) } &40,000 \\\hline \text { Net income (loss) } & \$60,000 \\\hline \text { Other comprehensive income } &20,000 \\\hline \text { Comprehensive income (loss) } & \$80,000 \\\hline\end{array}$$ At December 31, 2016, the fair value of the investment was $440,000 and at December 31, 2017, the fair value of the investment was $420,000.
Required:
Prepare X's journal entries for 2016 and 2017, assuming that this is a Portfolio Investment and is accounted for at fair value through profit and loss.

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Economic System

The structure of methods and principles a society uses to produce and distribute goods and services.

Great Depression

A severe worldwide economic downturn that took place during the 1930s, marked by high unemployment, widespread poverty, and deflation.

Prohibition

A period in American history, specifically from 1920 to 1933, during which the manufacture, sale, and transportation of alcoholic beverages was legally prohibited.