Question
In: Accounting
On March 31, 2012, Papa Doc Donuts, purchased 45,000 shares of Frenchie’s Beignets for $3.50 per...
On March 31, 2012, Papa Doc Donuts, purchased 45,000 shares of Frenchie’s Beignets for $3.50 per share. This purchase gives Papa Doc Donuts a 2.5% stake in Frenchie's Beignets. On January 1, 2013, Papa Doc Donuts purchased an additional 255,000 shares for $2.75 per share gaining an additional 17.5% stake in Frenchie's Beignets. The June 30, 2013 purchase gave Papa Doc Donuts the ability to apply significant influence over Frenchie's Beignets. The original 2.5% investment was categorized and accounted for as an available for sale security.
Frenchie's Beignets reports net income, cash dividends, and per share prices as follows. These amounts are assumed to have occurred evenly throughout these years. Cash dividends are declared and paid evenly throughout the same period.
Year:
2012 2013 2014
Net Income:
$975,000 $1,650,200 $1,575,000
Per share price (12/1 spot rate):
$105,200 $75,000 $120,000
Per Share Price (December 31st Spot Rate)
$2.75
$4.50
$5.75
On July 31, 2014, Papa Doc sells 60,000 shares of Frenchie's Beignets capital stock for $5.50 per share.
1.) Prepare the necessary journal entry Papa Doc Donuts would need to account for the March 31, 2012 acquisition of 2.5% of Frenchie's Beignets capital stock.
2.) Prepare Papa Doc Donuts December 31, 2012 journal entry.
3.) Prepare the necessary journal entry(s) Papa Doc Donuts would need to account for the January 1, 2013 acquisition of 17.5% of Frenchie's Beignets capital stock.{Hint- Something changes at this point, you should have more than one journal entry}
4.) Prepare Pap Doc Donuts December 31, 2013 journal entry(s)
5.) Prepare the necessary journal entry Papa Doc would need to account for the July 31, 2014 sell of 60,000 shares of Frenchie's Beignets for $5.50 per share.
Solutions
Expert Solution
| Books of Papa Doc Donuts | |||
| Date | Account Title | Debit | Credit |
| 1.. | |||
| Mar.31,2012 | Investment in Frenchie's Beignets-AFS | 157500 | |
| Cash | 157500 | ||
| (To record a 2.5% stake in the Co.) | |||
| Dec.31,2012 | Unrealised holding loss on Frenchie AFS | 33750 | |
| Valuation allowance/Investment in Frenchie's Beignets(AFS) | 33750 | ||
| (3.5-2.75)*45000 | |||
| Jan 1.2013 | Investment in Frenchie's Beignets | 701250 | |
| Cash | 701250 | ||
| (255000*2.75) | |||
| Investment in Frenchie's Beignets | 123750 | ||
| Investment in Frenchie's Beignets-AFS | 123750 | ||
| (To record the investment under equity method) | |||
| (45000*2.75) | |||
| Dec.31,2013 | Investment in Frenchie's Beignets | 330040 | |
| Investment Income | 330040 | ||
| (1650200*20%) | |||
| Proportionate Income | |||
| July 31,2014 | Investment in Frenchie's Beignets | 63000 | |
| Investment Income | 63000 | ||
| ($ 1575000*20%*60000 shares/300000 shares) | |||
| (Proportionate Income for the shares sold) | |||
| Cash(60000*5.5) | 330000 | ||
| Investment in Frenchie's Beignets((60000*2.75)+63000) | 228000 | ||
| Gain on sale of Inv.in Frenchie's stock | 102000 | ||
ekkarill92 answered 1 year agoRelated Solutions
On March 31, Year 1, Big Ltd. purchased 1,500 (15% ownership) of the shares of Small...
On March 31, Year 1, Big Ltd. purchased 1,500 (15% ownership) of
the shares of Small Ltd. at a price of $10 per share. On December
31, Year 1, Big’s year-end date, Small paid a dividend of $0.50 per
share and reported net income for the year of $25,000, which was
earned evenly over the year. On December 31, Year 1, the Small
shares had a fair value of $14 per share. Required: Provide all
journal entries to be made...
On March 1, 2012, the company purchased a building for $1,200,000 which is expected to last...
On March 1, 2012, the company purchased a
building for $1,200,000 which is expected to last 40 years. When
purchased, the building was not in a desirable area, but a new
stadium is being built nearby, so the value of the building on
December 31, 2015 is $2,000,000.
Assuming the company only adjusts depreciation at year-end, the
adjusting journal entry on December 31, 2015 is:
On December 31, 2017, Dow Steel Corporation had 750,000 shares of common stock and 45,000 shares...
On December 31, 2017, Dow Steel Corporation had 750,000 shares
of common stock and 45,000 shares of 7%, noncumulative,
nonconvertible preferred stock issued and outstanding. Dow issued a
4% common stock dividend on May 15 and paid cash dividends of
$550,000 and $84,000 to common and preferred shareholders,
respectively, on December 15, 2018.
On February 28, 2018, Dow sold 60,000 common shares. In keeping
with its long-term share repurchase plan, 2,000 shares were retired
on July 1. Dow's net income...
Shamrock Cosmetics Co. purchased machinery on December 31, 2016, paying $45,000 down and agreeing to pay...
Shamrock Cosmetics Co. purchased machinery on December 31, 2016,
paying $45,000 down and agreeing to pay the balance in four equal
installments of $45,600 payable each December 31. An assumed
interest of 8% is implicit in the purchase price.
Prepare the journal entries that would be recorded for the purchase
and for (1) the payments and (2) interest on the following dates.
(Round answers to 0 decimal places, e.g. 38,548. If no
entry is required, select "No Entry" for the...
On March 31, 2018, the Herzog Company purchased a factory complete with machinery and equipment. The...
On March 31, 2018, the Herzog Company purchased a factory
complete with machinery and equipment. The allocation of the total
purchase price of $930,000 to the various types of assets along
with estimated useful lives and residual values are as follows:
Asset
Cost
Estimated Residual Value
Estimated Useful
Life in Years
Land
$
135,000
N/A
N/A
Building
430,000
none
20
Machinery
230,000
12% of cost
10
Equipment
135,000
$
13,000
4
Total
$
930,000
On June 29, 2019, machinery included...
XYZ Industries purchased a new asset on March 31, 2020. The cost of the asset was...
XYZ Industries purchased a new asset on March 31, 2020. The cost
of the asset was 140,000, with an estimated useful life of 8 years,
and a salvage value of $15,000. XYZ uses the
sum-of-the-years-digits method to depreciate the asset.
What is the book value of the asset on December 31, 2022?
67,709
72,291
None of the other answer choices is correct.
118,299
67,083
65,973
72,917
21,701
74,027
On March 31, 2018, the Herzog Company purchased a factory complete with machinery and equipment. The...
On March 31, 2018, the Herzog Company purchased a factory
complete with machinery and equipment. The allocation of the total
purchase price of $1,090,000 to the various types of assets along
with estimated useful lives and residual values are as follows:
Asset
Cost
Estimated Residual Value
Estimated Useful
Life in Years
Land
$
145,000
N/A
N/A
Building
590,000
none
20
Machinery
150,000
12% of cost
8
Equipment
205,000
$
16,000
6
Total
$
1,090,000
On June 29, 2019, machinery included...
On March 31, 2021, the Herzog Company purchased a factory complete with vehicles and equipment. The...
On March 31, 2021, the Herzog Company purchased a factory
complete with vehicles and equipment. The allocation of the total
purchase price of $1,000,000 to the various types of assets along
with estimated useful lives and residual values are as follows:
Asset
Cost
Estimated Residual
Value
Estimated Useful
Life (in years)
Land
$ 100,000
N/A
N/A
Building
500,000
none
25
Equipment
240,000
10% of cost
8
Vehicles
160,000
$12,000
8
Total
$1,000,000
On June 29, 2022, equipment included in the March...
On March 31, 2021, the Herzog Company purchased a factory complete with vehicles and equipment. The...
On March 31, 2021, the Herzog Company purchased a factory
complete with vehicles and equipment. The allocation of the total
purchase price of $960,000 to the various types of assets along
with estimated useful lives and residual values are as follows:
Asset Cost Estimated Residual Value Estimated Useful Life (in
years) Land $ 120,000 N/A N/A Building 460,000 none 25 Equipment
260,000 10% of cost 6 Vehicles 120,000 $ 15,000 10 Total $ 960,000
On June 29, 2022, equipment included...
On March 31, 2018, the Herzog Company purchased a factory complete with machinery and equipment. The...
On March 31, 2018, the Herzog Company purchased a factory
complete with machinery and equipment. The allocation of the total
purchase price of $1,050,000 to the various types of assets along
with estimated useful lives and residual values are as follows:
Asset
Cost
Estimated Residual Value
Estimated Useful
Life in Years
Land
$
125,000
N/A
N/A
Building
550,000
none
20
Machinery
190,000
12% of cost
8
Equipment
185,000
$
13,000
4
Total
$
1,050,000
On June 29, 2019, machinery included...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Summarize in one to two sentences the general diagnostic criteria of neurocognitive disorders. Researcg and descruve...
- Pressure in a storage tank is maintained at 1 MN/m2 to supply water at 20oC and...
- Calculate the dew point temperature (to the nearest ºC); the corresponding vapor pressures of ethanol and...
- Give the Answers to Following as true or False: Also give the reason 1. A salesperson...
- You wire a real battery to a R1 = 42 Ω resistor and find that the...
- Question B1 In 2002, Musk sold his second internet startup, PayPal, to eBay for $1.5 billion....
- Need to process these steps in UNIX. To encourage users to get a good night's sleep,...
ADVERTISEMENT