On January 1,20X8,XZ Co

question 18

Essay

On January 1,20X8,XZ Co.purchased 3,000 shares,representing 30% of AR Limited,for $390,000.XZ is a publicly traded company.AR's total net income was $86,000 for the year ended December 31,20X8.AR also paid dividends in total of $25,000 during 20X8.At the year end,each share of AR was trading at $150 per share.
Required:
a.Based on the information above,show the journal entries that XZ would have used to report its original purchase and any related investment income for AR for 20X8 assuming that XZ reports its investment in AR using FVTPL.What is the investment account balance at the end of December 31,20X8?
b.Based on the information above,show the journal entries that XZ would have used to report its original purchase and any related investment income for AR for 20X8 assuming that XZ reports its investment in AR as a significantly influenced investment.What is the investment account balance at the end of December 31,20X8?

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Definitions:

Collusion Model

A framework describing how firms may work together, often secretly, to control prices or market conditions, typically to reduce competition and increase profits.

Monopoly

A market structure characterized by a single seller or producer dominating the entire market, with no close substitutes for the product or service offered.

Behavioural Agent

An entity in software or computing that acts autonomously in an environment by responding to sensory inputs with actions that maximize its chance of achieving designated goals.

Managerial Agent

A person who makes decisions and acts on behalf of the owners of a company, typically within the framework of agency theory.