Question

In: Accounting

Sofie Company buys stock in Nut Corporation in cash on January 1, 2020, and reports the...

Sofie Company buys stock in Nut Corporation in cash on January 1, 2020, and reports the investment as having no significant influence.

The percentage of investment 15% Amount paid $6,000,000

On January 1, 2022, Sofie Company makes the following additional investment in Nut Corporation and changes to the equity method of reporting for this investment.

The additional percentage of investment 25% Additional amount paid $15,000,000

Fair value of the 15% investment is as follows: 12/31/2020 $6,200,000 12/31/2021 $6,450.000

Nut Corporation reported the following amounts for the years;

Net income 2020- $150,000 2021- $200,000 2022- $250,000

Cash dividend(paid at year-end) 2020- $50,000 2021- $80,000 2022- $100,000

Additional information: Nut Corporation reported no comprehensive income and any basis difference is attributed to goodwill.

A. Prepare all the journal entries that Sofie Company would records for the investment in Nut Corporation for 2020,.2021, and 2022. Journal entries should be set up in good form.

You need to provide dates, use appropriate account titles, and include an explanation below each journal entry.

B. Develop a table showing the calculation of what the amount Sofie Corporation will report on the balance sheet for the investment in Nut Corporation on December 31, 2022.

Solutions

Expert Solution

Journal Entries
Date Account Titles and Explanation Debit Credit
1-Jan-20 Investment in Nut Corporation $6,000,000
Cash $6,000,000
(To record investment in Nut corporation-15%)
31-Dec-20 Cash (50000 x 15%) $7,500
Dividend Income $7,500
(To record dividend income received from nut corp.)
31-Dec-20 Investment in Nut Corporation $200,000
Unrealized gain on Fair valuation $200,000
(To record increase in fair value of investment)
31-Dec-21 Cash (80000 x 15%) $12,000
Dividend Income $12,000
(To record dividend income received from nut corp.)
31-Dec-21 Investment in Nut Corporation $250,000
Unrealized gain on Fair valuation $250,000
(To record increase in fair value of investment)
1-Jan-22 Investment in Nut Corporation $15,000,000
Cash $15,000,000
(To record investment in Nut corporation-25%)
31-Dec-22 Cash (100000 x 40%) $40,000
Dividend Income $40,000
(To record dividend income received from nut corp.)
31-Dec-22 Investment in Nut Corporation $100,000
Income from Nut Corporation(250000x40%) $100,000

Related Solutions

Sofie Company buys stock in Nut Corporation in cash on January 1, 2020, and reports the...
Sofie Company buys stock in Nut Corporation in cash on January 1, 2020, and reports the investment as having no significant influence. The percentage of investment 15% Amount paid $6,000,000 On January 1, 2022 Sofie Company makes the following additional investment in Nut Corporation and changes to the equity method of reporting for this investment: The additional percentage of investment 25% Additional amount paid $15,000,000 December 31, 2020 December 31, 2021 Fair value of the 15% investment is as follows:...
Sofie Company buys stock in Nut Corporation in cash on January 1, 2020, and reports the...
Sofie Company buys stock in Nut Corporation in cash on January 1, 2020, and reports the investment as having no significant influence. The percentage of investment 15% Amount paid $6,000,000 On January 1, 2022 Sofie Company makes the following additional investment in Nut Corporation and changes to the equity method of reporting for this investment: The additional percentage of investment 25% Additional amount paid $15,000,000 December 31, 2020 December 31, 2021 Fair value of the 15% investment is as follows:...
On January 1, 2020, Pantop Corporation acquired 85% of the outstanding common stock of Sunny Company...
On January 1, 2020, Pantop Corporation acquired 85% of the outstanding common stock of Sunny Company for $527,000. There was no control premium. The following information about Sunny Company on January 1, 2020 was available: Book value Fair value Cash 193,000 193,000 Inventory 40,000 39,400 Building 180,000 200,000             Total 413,000 432,400 Accounts Payable     3,000     3,000 Common Stock 200,000 Add. Paid-in Capital 110,000 Retained Earnings 100,000                     Total 413,000 Pantop uses the complete equity method to account for...
On January 1, 2020, Pantop Corporation acquired 85% of the outstanding common stock of Sunny Company...
On January 1, 2020, Pantop Corporation acquired 85% of the outstanding common stock of Sunny Company for $527,000. There was no control premium. The following information about Sunny Company on January 1, 2020 was available: Book value Fair value Cash 193,000 193,000 Inventory   40,000   39,400 Building 180,000 200,000                     Total 413,000 432,400 Accounts Payable     3,000     3,000 Common Stock 200,000 Add. Paid-in Capital 110,000 Retained Earnings 100,000                     Total 413,000 Pantop uses the complete equity method to account for its investment in Sunny....
Padre, Inc., buys 80 percent of the outstanding common stock of Sierra Corporation on January 1,...
Padre, Inc., buys 80 percent of the outstanding common stock of Sierra Corporation on January 1, 2021, for $760,960 cash. At the acquisition date, Sierra’s total fair value, including the noncontrolling interest, was assessed at $951,200 although Sierra’s book value was only $619,000. Also, several individual items on Sierra’s financial records had fair values that differed from their book values as follows: Book Value Fair Value Land $ 67,400 $ 290,400 Buildings and equipment (10-year remaining life) 335,000 299,000 Copyright...
Padre, Inc., buys 80 percent of the outstanding common stock of Sierra Corporation on January 1,...
Padre, Inc., buys 80 percent of the outstanding common stock of Sierra Corporation on January 1, 2015, for $751,680 cash. At the acquisition date, Sierra’s total fair value, including the noncontrolling interest, was assessed at $939,600 although Sierra’s book value was only $683,000. Also, several individual items on Sierra’s financial records had fair values that differed from their book values as follows: Book Value Fair Value   Land $ 68,200 $ 268,200   Buildings and equipment   (10-year remaining life) 350,000 327,000   Copyright...
Padre, Inc., buys 80 percent of the outstanding common stock of Sierra Corporation on January 1,...
Padre, Inc., buys 80 percent of the outstanding common stock of Sierra Corporation on January 1, 2021, for $680,000 cash. At the acquisition date, Sierra’s total fair value, including the noncontrolling interest, was assessed at $850,000 although Sierra’s book value was only $600,000. Also, several individual items on Sierra’s financial records had fair values that differed from their book values as follows Book Value Fair Value Land $ 60,000 $ 225,000 Buildings and equipment (10-year remaining life) 275,000 250,000 Copyright...
Padre, Inc., buys 80 percent of the outstanding common stock of Sierra Corporation on January 1,...
Padre, Inc., buys 80 percent of the outstanding common stock of Sierra Corporation on January 1, 2018, for $736,960 cash. At the acquisition date, Sierra’s total fair value, including the noncontrolling interest, was assessed at $921,200 although Sierra’s book value was only $634,000. Also, several individual items on Sierra’s financial records had fair values that differed from their book values as follows: Book Value Fair Value Land $ 60,800 $ 237,800 Buildings and equipment (10-year remaining life) 301,000 268,000 Copyright...
Padre, Inc., buys 80 percent of the outstanding common stock of Sierra Corporation on January 1,...
Padre, Inc., buys 80 percent of the outstanding common stock of Sierra Corporation on January 1, 2018, for $771,840 cash. At the acquisition date, Sierra’s total fair value, including the noncontrolling interest, was assessed at $964,800 although Sierra’s book value was only $609,000. Also, several individual items on Sierra’s financial records had fair values that differed from their book values as follows: Book Value Fair Value Land $ 68,400 $ 300,400 Buildings and equipment (10-year remaining life) 322,000 293,000 Copyright...
Padre, Inc., buys 80 percent of the outstanding common stock of Sierra Corporation on January 1,...
Padre, Inc., buys 80 percent of the outstanding common stock of Sierra Corporation on January 1, 2015, for $796,960 cash. At the acquisition date, Sierra’s total fair value, including the noncontrolling interest, was assessed at $996,200 although Sierra’s book value was only $623,000. Also, several individual items on Sierra’s financial records had fair values that differed from their book values as follows: Book Value Fair Value   Land $ 60,600 $ 286,600   Buildings and equipment   (10-year remaining life) 340,000 322,000   Copyright...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT