Equity Method for Stock InvestmentOn January 4, Year 1, Ferguson Company purchased 80,000 shares of Silva Company directly from one of the founders for a price of $64 per share. Silva has 250,000 shares outstanding, including the Daniels shares. On July 2, Year 1, Silva paid $196,000 in total dividends to its shareholders. On December 31, Year 1, Silva reported a net income of $747,000 for the year. Ferguson uses the equity method in accounting for its investment in Silva.a. Provide the Ferguson Company journal entries for the transactions involving its investment in Silva Company during Year 1.Year 1, Jan. 4 Investment in Silva Company Stock Cash Year 1, July 2 Cash Dividends Dividend Revenue Year 1, Dec. 31 b. Determine the December 31, Year 1, balance of Investment in Silva Company Stock.$
Equity Method for Stock Investment
On January 4, Year 1, Ferguson Company purchased 80,000 shares of Silva Company directly from one of the founders for a price of $64 per share. Silva has 250,000 shares outstanding, including the Daniels shares. On July 2, Year 1, Silva paid $196,000 in total dividends to its shareholders. On December 31, Year 1, Silva reported a net income of $747,000 for the year. Ferguson uses the equity method in accounting for its investment in Silva.
a. Provide the Ferguson Company
Year 1, Jan. 4
Investment in Silva Company Stock
Cash
Year 1, July 2
Cash Dividends
Dividend Revenue
Year 1, Dec. 31
b. Determine the December 31, Year 1, balance of Investment in Silva Company Stock.
$
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