Question
In: Accounting
On July 1, 2020, Altuve Inc. purchased 6,000 shares of the outstanding common stock of Trout...
On July 1, 2020, Altuve Inc. purchased 6,000 shares of the
outstanding common stock of Trout Corp at a cost of $140,000. Trout
had 30,000 shares of outstanding common stock. The total book value
and total fair value of Trout's individual net assets on July 1,
2020, are both $700,000. The total fair value of the 30,000 shares
of Trout's common stock on December 31, 2020, is $760,000. Both
companies have a January through December fiscal year. The
following data pertains to Trout Corporation during 2020:
|
Dividends declared and paid, Jan. 1-Jun. 30 |
$12,000 |
|
Dividends declared and paid, Jul. 1-Dec. 31 |
$12,000 |
|
Net income, January 1-June 30 |
$14,000 |
|
Net income, July 1-December 31 |
$18,000 |
Required:
1. Prepare the necessary entries for 2020 under the equity method
(other than for the purchase).
2. Prepare any necessary entries for 2020 (other than for the
purchase) that would be required if the securities are classified
as available for sale.
Solutions
Expert Solution
1)
JOURNAL ENTRIES UNDER EQUITY MENTHOD
| DATE | PARTICULAR | DEBIT | CREDIT |
| CASH ( $12,000*20%) | $2400 | ||
| INVESTMENT IN TROUT CORP | $2,400 | ||
| (TO RECORD THE ENTRY OF CASH DIVIDEND RECEIVED AN ACCOUNTOF 6000 SHARES HELD OUT OF 30000 SHARES | |||
| INVESTMENT -TROUT CORP ($18,000*20%) | $3600 | ||
| INVESTMENT REVENUE | $3,600 | ||
| BEING ENTRY RECORDED FOR THE INVESTMENT REVENUE UNDER THE EQUITY METHOD | |||
2) JOURNAL ENTRIES UNDER THE AVAILABE FOR SALE ARE PROVIDED BELOW
| DATE | PARTICULAR | DEBIT | CREDIT |
| CASH ( $12,000*20%) | $2400 | ||
| DIVIDEND INCOME | $2,400 | ||
| (TO RECORD THE ENTRY OF CASH DIVIDEND RECEIVED AN ACCOUNTOF 6000 SHARES HELD OUT OF 30000 SHARES | |||
| FAIR VALUE ADJUSTMENT ( $760,000-$700,000)*20% | $12,000 | ||
| IUN REALIZED GAIN OR LOSS (OTHER COMPREHENSIVE INCOME) | $12,000 | ||
| BEING ENTRY RECORDED FOR THE INVESTMENT REVENUE UNDER THE EQUITY METHOD | |||
IF ANY DOUBT PLEASE ,EMTIN IN COMMENT
ekkarill92 answered 2 years agoRelated Solutions
XYZ Company had 200,000 shares of common stock outstanding on December 31, 2020. On July 1,...
XYZ Company had 200,000 shares of common stock outstanding on
December 31, 2020. On July 1, 2021, XYZ issued an additional 40,000
shares for cash. On January 1, 2021, XYZ issued 10,000 shares of
convertible preferred stock. The preferred stock had a par value of
$100 per share and paid a 5% dividend. Each share of preferred
stock is convertible into 8 shares of common. During 2021, XYZ paid
the regular annual dividend on the preferred and common stock. Net...
XYZ Company had 200,000 shares of common stock outstanding on December 31, 2020. On July 1,...
XYZ Company had 200,000 shares of common stock outstanding on
December 31, 2020. On July 1, 2021, XYZ issued an additional 47,000
shares for cash. On January 1, 2021, XYZ issued 17,000 shares of
convertible preferred stock. The preferred stock had a par value of
$100 per share and paid a 6% dividend. Each share of preferred
stock is convertible into 9 shares of common. During 2021, XYZ paid
the regular annual dividend on the preferred and common stock. Net...
On January 1, 2020, Jordan Inc. purchased 30% of the outstanding common stock of Melody Corporation...
On January 1, 2020, Jordan Inc. purchased 30% of the outstanding
common stock of Melody Corporation at a cost of $600,000. Melody
Corporation had 800,000 shares of common stock outstanding. At the
date of purchase, the book value of Melody’s net assets was
$1,500,000. Book value and fair value of net assets were the same
for all balance sheet items except for machinery and inventory. The
fair value exceeded the book value by $200,000 for machinery and
$50,000 for the...
Sheridan Inc. has outstanding 14,500 shares of $10 par value common stock. On July
Sheridan Inc. has outstanding 14,500 shares of $10 par value common stock. On July 1, 2020, Sheridan reacquired 112 shares at $88 per share. On September 1, Sheridan reissued 65 shares at $94 per share. On November 1, Sheridan reissued 47 shares at $86 per share. Prepare Sheridan’s journal entries to record these transactions using the cost method.
On July 1, 2020, Dynamic Company purchased for cash 40% of the outstanding capital stock of...
On July 1, 2020, Dynamic Company purchased for cash 40% of the
outstanding capital stock of Cart Company. Both Dynamic and Cart
have a December 31 year-end. Cart, whose common stock is actively
traded in the over-the-counter market, reported its total net
income for the year to Dynamic and also paid cash dividends on
November 15, 2020, to Dynamic and its other stockholders.
Required:
a. How should Dynamic report the foregoing facts in its December
31, 2020, balance sheet and...
On January 1, 2020, a company had 700,000 shares of common stock outstanding. On March 1,...
On January 1, 2020, a company had 700,000 shares of common stock
outstanding. On March 1, it issued a 3-for-1 stock split. On July 1
it Issued 50,000 shares. On September 1 it Issued a 20% stock
dividend. Determine the weighted-average number of shares
outstanding as of December 31, 2020.
Fairyland Inc. has 4 million shares of common stock outstanding, 1 million shares of preferred stock...
Fairyland Inc. has 4 million shares of common stock outstanding,
1 million shares of preferred stock outstanding, and 200 thousand
bonds. The common shares are selling for $25 per share, the
preferred share are selling for $10 per share, and the bonds are
selling for 95 percent of their $1,000 par. (See P10-3 for formula
to calculate weights).
A. What would be the weight used for equity in the computation
of FarCry’s WACC?
B. What weight should you use for...
On July 1, 2019, ABB Company, Inc. purchased 30% of the outstanding ordinary shares of ABC...
On July 1, 2019, ABB Company, Inc. purchased 30% of the
outstanding ordinary shares of ABC Company for P5,160,000 cash,
including transaction cost of P160,000. ABB Company gained ability
to exercise influence over ABC Company as a result of this
acquisition. On the date of acquisition, the fair value of ABC’s
net assets was P12,400,000. ABB Company has determined that the
excess of the cost of the investment over its share of ABC’s net
assets is attributable to goodwill. ABC’s...
Velesaca Inc. issues 6,000 shares of common stock for $96,000. The stock has a stated value...
Velesaca Inc. issues 6,000 shares of common stock for $96,000.
The stock has a stated value of $4 per share. The journal entry to
record the stock issuance would include a:
a.
credit to Common Stock for $24,000
b.
credit to Cash for $96,000
c.
credit to Paid-In Capital in Excess of Par for $24,000
d.
credit to Common Stock for $96,000
Velesaca Inc. issues 6,000 shares of common stock for $96,000. The stock has a stated value...
Velesaca Inc. issues 6,000 shares of common stock for $96,000.
The stock has a stated value of $4 per share. The journal entry to
record the stock issuance would include a:
a.
credit to Common Stock for $24,000
b.
credit to Cash for $96,000
c.
credit to Paid-In Capital in Excess of Par for $24,000
d.
credit to Common Stock for $96,000
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Consider a buffer system consisting of Benzoic acid (pKa = 4.20) and sodium benzoate, a) Would...
- Decision Variables S T Minimize 1.8S + 2.20T Subject to: Potassium 5S + 8T >= 200...
- A neurologist needs to counsel a stroke victim and her husband about possible outcomes, treatment options,...
- Case Study: Personal Beliefs in the Workplace Don Shakow was a prominent professional who worked in...
- 1: Competency framework usage is the modern best practice in management. What is meant by competency...
- A 19.34 g mixture of sugar (C12H22O11) and table salt (NaCl) is dissolved in 231 g...
- Young and Company claims that its pressurized diving bell will, on average, maintain its integrity to...
ADVERTISEMENT