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Equity Method On January 2, 2015, Winstead & Company purchased 1,000,000 shares of the Secrest Company...

Equity Method

On January 2, 2015, Winstead & Company purchased 1,000,000 shares of the Secrest Company for $32 million. The investment represented 40 percent of the outstanding common shares of The Secrest Company. During 2015, Secrest reported net earnings of $1.05 per share and paid a cash dividend of $0.35 per share.

During 2016, Secrest reported net earnings of $1.50 per share and paid a cash dividend of $0.40 per share.

Calculate the book value of Winstead’s investment in Secrest as of December 31, 2015, and December 31, 2016.

2015 $Answer
2016 $Answer

Solutions

Expert Solution

JOURNAL ENTRY
Date Account Debit Credit
.January2, 2015 Investment in Secrest Company $32,000,000
Cash $32,000,000
.December 31, 2015 Investment in Secrest Company $1,050,000 (1000000*1.05)
Equity in Secrest company income $1,050,000
.December 31, 2015 Cash $350,000 (1000000*0.35)
Investment in Secrest Company $350,000
.December 31, 2016 Investment in Secrest Company $1,500,000 (1000000*1.5)
Equity in Secrest company income $1,500,000
.December 31, 2016 Cash $400,000 (1000000*0.40)
Investment in Secrest Company $400,000
2015 Book value of Investment in Secrest Company as on December 31, 2015 $32,700,000 (32000000+1050000-350000)
2016 Book value of Investment in Secrest Company as on December 31, 2015 $33,800,000 (32700000+1500000-400000)

jeff jeffy answered 2 years ago
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