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Windsor Inc. acquired 20% of the outstanding common stock of Theresa Kulikowski Inc. on December 31,...

Windsor Inc. acquired 20% of the outstanding common stock of Theresa Kulikowski Inc. on December 31, 2020. The purchase price was $1,205,000 for 48,200 shares. Kulikowski Inc. declared and paid an $0.85 per share cash dividend on June 30 and on December 31, 2021. Kulikowski reported net income of $692,000 for 2021. The fair value of Kulikowski’s stock was $28 per share at December 31, 2021. Assume that the security is a trading security.

Prepare the journal entries for Windsor Inc. for 2020 and 2021, assuming that Windsor cannot exercise significant influence over Kulikowski. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

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Expert Solution

Assumption Windsor cannot exercise significant influence over Kulikowski
Date General Journal Debit Credit
December 31,2020 Equity investments $ 1,205,000
        Cash $ 1,205,000
(To record the investment)
June 30,2021 Cash
( 48,200 Shares x $ 0.85)
$ 40,970
      Dividend Revenue $ 40,970
(To record the dividend paid)
December 31,2021 Cash
( 48,200 Shares x $ 0.85)
$ 40,970
      Dividend Revenue $ 40,970
(To record the dividend paid)
December 31,2021 Fair value adjustment
( $ 1,205,000 (-) ( 48,200 shares x $ 28)
$ 144,600
           Unrealized holding gain (or) Loss - Income $ 144,600
(To record the fair value Adjustment )

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