Question
In: Accounting
8. Exercise 15-12 Securities transactions; equity method LO P4 Listed below are a few events and...
8. Exercise 15-12 Securities transactions; equity method LO P4
Listed below are a few events and transactions of Kodax Company.
2017
| Jan. | 2 | Purchased 24,000 shares of Grecco Co. common stock for $412,000 cash plus a broker’s fee of $3,400 cash. Grecco has 100,000 shares of common stock outstanding, and its policies will be significantly influenced by Kodax. |
| Sept. | 1 | Grecco declared and paid a cash dividend of $1.90 per share. |
| Dec. | 31 | Grecco announced that net income for the year is $492,900. |
2018
| June | 1 | Grecco declared and paid a cash dividend of $2.50 per share. |
| Dec. | 31 | Grecco announced that net income for the year is $710,400. |
| Dec. | 31 | Kodax sold 12,000 shares of Grecco for $340,000 cash. |
Prepare journal entries to record the above transactions and events
of Kodax Company. (Do not round intermediate calculations
and round your final answers to the nearest dollar
amount.)
Solutions
Expert Solution
|
No: |
Description |
Debit $` |
Credit $ |
|
2017 |
|||
|
Jan |
Longterm investments—Grecco |
415400 |
|
|
Cash (412000+3400) |
415400 |
||
|
Sep |
Cash (24000*1.90) |
45600 |
|
|
Longterm investments—Grecco |
45600 |
||
|
Dec. |
Longterm investments—Grecco |
118296 |
|
|
Earnings from longterm investment |
118296 |
||
|
(492900*24000/100,000) |
|||
|
2018 |
|||
|
June |
Cash (24000x2.50) |
60000 |
|
|
Longterm investments—Grecco |
60000 |
||
|
Dec. |
Longterm investments—Grecco |
170496 |
|
|
Earnings from longterm investment |
170496 |
||
|
(710,400*24000/10000) |
|||
|
Dec. |
Cash |
340,000 |
|
|
Gain on sale of investment |
40,704 |
||
|
Longterm investments—Grecco |
299296 |
||
Working notes for the above answer is as under
|
Record sale of investment |
|
|
original cost |
415400 |
|
less 2017 dividends |
-45600 |
|
add 2017 earnings |
118296 |
|
less 2018 dividends |
-60000 |
|
add 2018 earnings |
170496 |
|
book value at date of sale |
598592 |
|
Book value of share sold 598592/24000*12000 |
299,296 |
ekkarill92 answered 8 months agoRelated Solutions
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