Question

In: Accounting

On January 1 Criquet Co. acquired an interest in the Tamlee Co. for $500,000. At December...

On January 1 Criquet Co. acquired an interest in the Tamlee Co. for $500,000. At December 31, Tamlee Co. declared and paid a cash dividend of $50,000 and reported a net income of $160,000.

REQUIRED:

Prepare the journal entries for the Criquet Co. under each of the independent circumstances:

a. Criquet Co. acquires a 10% interest in the Tamlee Co.

b. Criquet Co. acquires a 25% interest in the Tamlee Co.

Solutions

Expert Solution

a) Jan 1 - Purchase Investment in Tamlee Co. Stock 500000
        Cash 500000
(To record the 10% share of stock in Tamlee Co.)
Dec 31 - Income Investment in Tamlee Co. Stock 16000
        Income of Tamlee Co. ( 160000 x 10%) 16000
(To record the share in income on Tamlee Co.)
Dec 31- Dividends Cash ( 50000 x 10% ) 5000
        Investment in Tamlee Co. Stock 5000
(To record the dividend received from Tamlee Co.)
b) Jan 1 - Purchase Investment in Tamlee Co. Stock 500000
        Cash 500000
(To record the 25% share of stock in Tamlee Co.)
Dec 31 - Income Investment in Tamlee Co. Stock 40000
        Income of Tamlee Co. ( 160000 x 25%) 40000
(To record the share in income on Tamlee Co.)
Dec 31- Dividends Cash ( 50000 x 25% ) 12500
        Investment in Tamlee Co. Stock 12500
(To record the dividend received from Tamlee Co.)

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2. On January 1 Criquet Co. acquired an interest in the Tamlee Co. for $500,000. At December 31, Tamlee Co. declared and paid a cash dividend of $50,000 and reported a net income of $160,000. REQUIRED: Prepare the journal entries for the Criquet Co. under each of the independent circumstances: a. Criquet Co. acquires a 10% interest in the Tamlee Co. b. Criquet Co. acquires a 25% interest in the Tamlee Co.
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