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 | ||||||
| December 31, 2020 | December 31, 2021 | ||||||||
| Fair value of the 15% investment is as follows: | $6,200,000 | $6,450,000 | |||||||
| Nut Corporation reported the following amounts for the years: | |||||||||
| 2020 | 2021 | 2022 | |||||||
| Net Income | $150,000 | $200,000 | $250,000 | ||||||
| Cash dividends (Paid at year-end) | $50,000 | $80,000 | $100,000 | ||||||
| Additional information: Nut Corporation reported no comprehensive income and any basis difference is attributed to goodwill. | |||||||||
| Required: You should use cell references in providing a number or preparing a calculations by referencing the data above. Prepare you answer in the solution area provided. | |||||||||
| A. Prepare all the journal entries that Sofie Company would record 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. | |||||||||
| Solution: | |||||||||
Solutions
Expert Solution
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*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 | $12,000 | |
| Dividend income | $12,000 | ||
| (To record dividend income received from nut crop.) | |||
| 31-Dec-21 | Investment in Nut Corporation | $250,000 | |
| Unrealized gain on fair valuation | $250,000 | ||
| (To record increase in fair value in 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*40%) | $40,000 | |
| Dividend Income | $40,000 | ||
| (To record dividend income received from nut crop.) | |||
| 31-Dec-22 | Investment in Nut Corporation | $100,000 | |
| Income from Nut Coporation(250000*40%) | $100,000 | ||
ekkarill92 answered 1 year agoRelated 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
Fair value of the 15% investment is as follows: 12/31/2020
$6,200,000 12/31/2021 $6,450.000
Nut Corporation...
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:...
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Cash
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3,000
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Common Stock
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Add. Paid-in Capital
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Inventory
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Building
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432,400
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