Question
In: Accounting
Fredo, Inc., purchased 10% of Sonny Enterprises for $1,000,000 on January 1, 2018. Sonny recognized a...
Fredo, Inc., purchased 10% of Sonny Enterprises for $1,000,000 on January 1, 2018. Sonny recognized a total of $400,000 net income during 2018, paid $30,000 of dividends to Fredo during 2018, and at December 31, 2018, the market value of the Sonny investment increased to $1,040,000.
Required: Prepare the journal entries necessary to account for the Sonny investment, assuming that Fredo:
(1) Lacks significant influence
(2) Assume that with the 10% purchase Fredo has significant influence over the operating and financial policies of the investee.
Solutions
Expert Solution
| Date | Account Titles and Explanation | Debit | Credit |
| 1 | Investment in Sonny - Common Stock | 1,000,000.00 | |
| Cash | 1,000,000.00 | ||
| (record the purchase o Sonny Common Stock) | |||
| 2 | Cash | 30,000.00 | |
| Investment Revenue | 30,000.00 | ||
| (record the dividend recd from Sonny) | |||
| 3 | Fair Value Adjustment | 40,000.00 | |
| Unrealized Holding Gain / Loss - OCI | 40,000.00 | ||
| (Record the faair value adjustments) | |||
| 4 | No entry for share of Net Profit Earned by Sonny | ||
| Date | Account Titles and Explanation | Debit | Credit |
| 1 | Investment in Sonny - Common Stock | 1,000,000.00 | |
| Cash | 1,000,000.00 | ||
| (record the purchase o Sonny Common Stock) | |||
| 2 | Cash | 30,000.00 | |
| Investment in Sonny - Common Stock | 30,000.00 | ||
| (record the dividend received) | |||
| 3 | Investment in Sonny - Common Stock | 40,000.00 | |
| Equity Income in Sonny | 40,000.00 | ||
| (record the Net Income share of florist) | |||
| 4 | No entry for Fair Value Adjustment | ||
ekkarill92 answered 1 year agoRelated Solutions
Fredo, Inc., purchased 10% of Sonny Enterprises for $1,000,000 on January 1, 2018. Sonny recognized a...
Fredo, Inc., purchased 10% of Sonny Enterprises for $1,000,000
on January 1, 2018. Sonny recognized a total of $310,000 net income
during 2018, paid $21,000 of dividends to Fredo during 2018, and at
December 31, 2018, the market value of the Sonny investment
increased to $1,031,000.
Required: Prepare the journal entries necessary to account for
the Sonny investment, assuming that Fredo
(1) lacks significant influence
a.Record the entry for investment in Sonny Enterprises.
b.Record the entry for cash dividend received....
Fredo, Inc., purchased 10% of Sonny Enterprises for $1,000,000 on January 1, 2018. Sonny recognized a...
Fredo, Inc., purchased 10% of Sonny Enterprises for $1,000,000
on January 1, 2018. Sonny recognized a total of $340,000 net income
during 2018, paid $24,000 of dividends to Fredo during 2018, and at
December 31, 2018, the market value of the Sonny investment
increased to $1,034,000. Required: Prepare the journal entries
necessary to account for the Sonny investment, assuming that Fredo
(1) lacks significant influence or (2) has significant influence
over the operating and financial policies of the investee.
Required...
Fredo, Inc., purchased 10% of Sonny Enterprises for $1,000,000 on January 1, 2021. Sonny recognized a...
Fredo, Inc., purchased 10% of Sonny Enterprises for $1,000,000
on January 1, 2021. Sonny recognized a total of $310,000 net income
during 2021, paid $21,000 of dividends to Fredo during 2021, and at
December 31, 2021, the market value of the Sonny investment
increased to $1,031,000.
Required:
Prepare the journal entries necessary to account for the Sonny
investment, assuming that Fredo (1) does not have significant
influence or (2) does have significant influence over the operating
and financial policies of...
4. On January 1, 2019, Roberts Inc. purchased 10% of the outstanding 1,000,000 common shares of...
4. On January 1, 2019, Roberts Inc. purchased 10% of the
outstanding 1,000,000 common shares of Sunk for $200,000. Roberts
Inc. considers this investment to be a non-strategic investment. At
the
December 31, 2020-year end, the fair value of this investment
was $208,000. Sunk's profit in 2020 was $100,000. Sunk paid a
dividend of $.60 per common share. On January 1, 2021, Robert
decided to buy an additional 25% of Sunk's 1,000,000 common shares
for $500,000. This second purchase allowed...
1. Cutter Enterprises purchased equipment for $72,000 on January 1, 2018. The equipment is expected to...
1. Cutter Enterprises purchased equipment for $72,000 on January
1, 2018. The equipment is expected to have a five-year life and a
residual value of $6,000.
Using the sum-of-the-years'-digits method, depreciation for 2019
and book value at December 31, 2019, would be:
Multiple Choice
$19,200 and $30,800 respectively.
$19,200 and $28,800 respectively.
$17,600 and $26,400 respectively.
$17,600 and $32,400 respectively.
2. Cutter Enterprises purchased equipment for $66,000 on January
1, 2018. The equipment is expected to have a five-year life...
On January 1, 2018, for $18.7 million, Cenotaph Company purchased 10% bonds, dated January 1, 2018,...
On January 1, 2018, for $18.7 million, Cenotaph Company
purchased 10% bonds, dated January 1, 2018, with a face amount of
$20.7 million. For bonds of similar risk and maturity, the market
yield is 12%. Interest is paid semiannually on June 30 and December
31
. Required: 1. Prepare the journal entry to record interest on
June 30, 2018, using the effective interest method.
2. Prepare the journal entry to record interest on December 31,
2018, using the effective interest...
Cutter Enterprises purchased equipment for $60,000 on January 1, 2018. The equipment is expected to have...
Cutter Enterprises purchased equipment for $60,000 on January 1,
2018. The equipment is expected to have a five-year life and a
residual value of $3,600. Using the sum-of-the-years'-digits
method, depreciation for 2018 and book value at December 31, 2018,
would be: (Do not round depreciation rate per year)
Cutter Enterprises purchased equipment for $96,000 on January 1, 2018. The equipment is expected to have...
Cutter Enterprises purchased equipment for $96,000 on January 1,
2018. The equipment is expected to have a five-year life and a
residual value of $4,500.
Using the sum-of-the-years'-digits method, depreciation for 2019
and book value at December 31, 2019, would be?
Cutter Enterprises purchased equipment for $102,000 on January 1, 2018. The equipment is expected to have...
Cutter Enterprises purchased equipment for $102,000 on January
1, 2018. The equipment is expected to have a five-year life and a
residual value of $6,600.
Using the sum-of-the-years'-digits method, depreciation for 2019
and book value at December 31, 2019, would be: (Do not
round depreciation rate per year)
Multiple Choice
$25,440 and $44,760 respectively.
$25,440 and $38,160 respectively.
$27,200 and $40,800 respectively.
$27,200 and $34,200 respectively.
Appling Enterprises issued 10% bonds with a face amount of $540,000 on January 1, 2018. The...
Appling Enterprises issued 10% bonds with a face amount of
$540,000 on January 1, 2018. The bonds sold for $496,675 and mature
in 2037 (20 years). For bonds of similar risk and maturity the
market yield was 11%. Interest is paid semiannually on June 30 and
December 31. Appling determines interest expense at the effective
rate. Appling elected the option to report these bonds at their
fair value. The fair values of the bonds at the end of each quarter...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Explain the difference between a market penetration strategy and a market development strategy.
- QUESTION 4 Discuss the sanctity of life versus the quality of life debate as presented by...
- 0.560 g He, 20.482 g F2, and 13.960 g Ar are placed in a 18.4-L container...
- Let X ∼ Pois(4), Y ∼ Pois(12), U ∼ Pois(3) be independent random variables. a) What...
- which one is more nucleophilic: hydroxide ion (OH) , or ammonia (NH3)? Explain why
- A sample mixture of ethyl benzoate (bp 212 C) and dodecane (bp 216.2 C) is injected...
- Consider the markets for fossil fuels (oil, coal, natural gas) and alternative energy sources (solar, wind,...
ADVERTISEMENT