October 30, 2016 admin

Investments—Subsidiaries & Affiliates

Assets

INVESTMENTS—SUBSIDIARIES & AFFILIATES ASSET ACCOUNT
1831

ACCOUNT EXPLANATION
The value of the dealership’s equity in subsidiary or affiliated companies in which the dealership owns 50% or more of the voting stock. Also, the cost or value of the dealership’s investments in subsidiary or affiliated companies in which the dealership owns less than 50% of the voting stock. An affiliated company is one under common control or ownership with the dealership.
TRANSACTIONS
  Jrnl. Dr. Cr.
  Purchase of stock of subsidiary or affiliated company CD
    Investments—Subsidiaries & Affiliates 1831
      Cash in Bank—General 1001
             
  Increase in dealership equity in investment in 100% owned subsidiary G
    Investments—Subsidiaries & Affiliates 1831
      Other Income 9300
             
  Decrease in dealership equity in investment for losses of subsidiary, or receipt of dividend from subsidiary G
    Other Income 9300
    Cash in Bank—General 1001
      Investments—Subsidiaries & Affiliates 1831
           
  Gain on sale of stock held in 30% owned subsidiary company CR  
    Cash in Bank—General   1001
      Investments—Subsidiaries & Affiliates (at cost)     1831
      Gain or Loss—Sale of Fixed Assets & Securities     9250
COMMENTS
  • Subsidiary records should support this account and should provide cumulative historical cost information for each investment.
  • The value of the dealership’s equity in subsidiaries and affiliates in which the dealership owns 50% or more of the voting stock should be adjusted for profits and losses at least once each year and for dividends immediately upon receipt of the dividend.
  • Cash dividends from subsidiaries and affiliates should be credited to Account 9200, Dividend Income, when received. (Note that the equity of the subsidiary should be reduced accordingly.)
  • Accounts receivable from subsidiaries and affiliates should be recorded in Account 1130, Accounts Receivable—Other.
  • Special treatment is required for income tax purposes with respect to income or expense arising from increases or decreases in equity in subsidiary or affiliated companies and for gain or loss on disposition of the stock. Therefore, dealers should consult tax counsel for the proper tax treatment.