Simmons Corporation owns
stock of Armstrong, Inc prior to 2010 the investment was accounted for using
the equity method. In early 2010, Simmons sold part of its investment in
Armstrong, and began using the fair value method. In 2010, Armstrong earned net
income of $80,000 and paid dividends of $95,000. Prepare Simmons’s entries
related to Armstrong’s net income and dividends, assuming Simmons now owns 10%
of Armstrong’s stock.
Cash ($95,000 X
10%).............................................................. 9,500
Available-for-Sale
Securities ....................................... 1,500
Dividend Revenue ($80,000 X
10%) ........................... 8,000
