Salinas Corporation acquired 20% of the outstanding common stock of Pebble Beach Corporation on December 31,...

Salinas Corporation acquired 20% of the outstanding common stock of Pebble Beach Corporation on December 31, 2020. The purchase price was $4,200,000 for 100,000 shares. Pebble Beach Corporation declared and paid a $.95 (cents) per share cash dividend on June 30 and on December 31, 2021. Pebble Beach reported net income of $1,720,000 for 2021. The fair market value of Pebble Beach Corporation’s stock was $30 per share at December 31, 2021.

Journal entries need be prepared for Salinas Corporation for 2020 and 2021, assuming Phelps is not able to exercise significant influence over Pebble Beach Corporation.
Journal entries need be prepared for Salinas Corporation for Salinas Corporation for 2020 and 2021, assuming that Salinas Corporation is able to exercise influence over Pebble Beach Corporation.

Expert Solution

a. Not able to exercise significant influence

Date	General Journal	Debit	Credit
Dec. 31, 2020	Equity Investment in Pebble Beach	4200000
	Cash		4200000
	(To record the purchase of investment)
June 30, 2021	Cash (100000 x $0.95)	95000
	Dividend revenue		95000
	(To record dividends received)
Dec. 31, 2021	Cash (100000 x $0.95)	95000
	Dividend revenue		95000
	(To record dividends received)
Dec. 31, 2021	Unrealized holding gain or loss	1200000
	Fair value adjustment [$4200000 - (100000 x $30)]		1200000
	(To record the investment at fair value)

b. Able to exercise significant influence

Date	General Journal	Debit	Credit
Dec. 31, 2020	Equity Investment in Pebble Beach	4200000
	Cash		4200000
	(To record the purchase of investment)
June 30, 2021	Cash (100000 x $0.95)	95000
	Equity Investment in Pebble Beach		95000
	(To record dividends received)
Dec. 31, 2021	Cash (100000 x $0.95)	95000
	Equity Investment in Pebble Beach		95000
	(To record dividends received)
Dec. 31, 2021	Equity Investment in Pebble Beach	344000
	Investment revenue (20% x $1720000)		344000
	(To record share in net income)

ekkarill92 answered 2 years ago

Windsor Inc. acquired 20% of the outstanding common stock of Theresa Kulikowski Inc. on December 31,...

Windsor Inc. acquired 20% of the outstanding common stock of Theresa Kulikowski Inc. on December 31, 2020. The purchase price was $1,205,000 for 48,200 shares. Kulikowski Inc. declared and paid an $0.85 per share cash dividend on June 30 and on December 31, 2021. Kulikowski reported net income of $692,000 for 2021. The fair value of Kulikowski’s stock was $28 per share at December 31, 2021. Assume that the security is a trading security. Prepare the journal entries for Windsor...

Flounder Inc. acquired 20% of the outstanding common stock of Theresa Kulikowski Inc. on December 31,...

Flounder Inc. acquired 20% of the outstanding common stock of Theresa Kulikowski Inc. on December 31, 2020. The purchase price was $1,031,800 for 46,900 shares. Kulikowski Inc. declared and paid an $0.80 per share cash dividend on June 30 and on December 31, 2021. Kulikowski reported net income of $714,000 for 2021. The fair value of Kulikowski’s stock was $25 per share at December 31, 2021. Assume that the security is a trading security. Prepare the journal entries for Flounder...

Metlock Inc. acquired 20% of the outstanding common stock of Theresa Kulikowski Inc. on December 31,...

Metlock Inc. acquired 20% of the outstanding common stock of Theresa Kulikowski Inc. on December 31, 2020. The purchase price was $1,310,000 for 52,400 shares. Kulikowski Inc. declared and paid an $0.75 per share cash dividend on June 30 and on December 31, 2021. Kulikowski reported net income of $667,000 for 2021. The fair value of Kulikowski’s stock was $28 per share at December 31, 2021. Assume that the security is a trading security. Prepare the journal entries for Metlock...

Pina Inc. acquired 20% of the outstanding common stock of Theresa Kulikowski Inc. on December 31,...

Pina Inc. acquired 20% of the outstanding common stock of Theresa Kulikowski Inc. on December 31, 2017. The purchase price was $1,031,800 for 46,900 shares. Kulikowski Inc. declared and paid an $0.80 per share cash dividend on June 30 and on December 31, 2018. Kulikowski reported net income of $714,000 for 2018. The fair value of Kulikowski’s stock was $25 per share at December 31, 2018. Assume that the security is a trading security. Prepare the journal entries for Pina...

Novak Inc. acquired 20% of the outstanding common stock of Theresa Kulikowski Inc. on December 31,...

Novak Inc. acquired 20% of the outstanding common stock of Theresa Kulikowski Inc. on December 31, 2017. The purchase price was $1,031,800 for 46,900 shares. Kulikowski Inc. declared and paid an $0.80 per share cash dividend on June 30 and on December 31, 2018. Kulikowski reported net income of $714,000 for 2018. The fair value of Kulikowski’s stock was $25 per share at December 31, 2018. Assume that the security is a trading security. Prepare the journal entries for Novak...

Sheffield Inc. acquired 20% of the outstanding common stock of Theresa Kulikowski Inc. on December 31,...

Sheffield Inc. acquired 20% of the outstanding common stock of Theresa Kulikowski Inc. on December 31, 2020. The purchase price was $1,320,800 for 50,800 shares. Kulikowski Inc. declared and paid an $0.90 per share cash dividend on June 30 and on December 31, 2021. Kulikowski reported net income of $755,000 for 2021. The fair value of Kulikowski’s stock was $29 per share at December 31, 2021. Assume that the security is a trading security. Prepare the journal entries for Sheffield...

On March 31, 2021, Wolfson Corporation acquired all of the outstanding common stock of Barney Corporation...

On March 31, 2021, Wolfson Corporation acquired all of the outstanding common stock of Barney Corporation for $17,100,000 in cash. The book values and fair values of Barney’s assets and liabilities were as follows: Book Value Fair Value Current assets $ 6,100,000 $ 7,600,000 Property, plant, and equipment 11,100,000 14,100,000 Other assets 1,010,000 1,510,000 Current liabilities 4,100,000 4,100,000 Long-term liabilities 6,100,000 5,600,000 Required: Calculate the amount paid for goodwill.

ROK Corporation had the following shares of stock outstanding on December 31, 2010: Common Stock, $25...

ROK Corporation had the following shares of stock outstanding on December 31, 2010: Common Stock, $25 par value, 200,000 shares outstanding Preferred stock, 7%, $100 par value, cumulative, 20,000 shares outstanding Dividends were in arrears for 2008 and 2009. On December 31, 2010, total cash dividends of $500,000 were declared. 1. What is the total amount of dividends payable to preferred stockholders in 2010? 2. What is the total amount of dividends payable to common stockholders in 2010? 3. ROK Corporation issued...

Ferry Corporation had 300,000 shares of common stock outstanding at December 31, 2020. In addition, it...

Ferry Corporation had 300,000 shares of common stock outstanding at December 31, 2020. In addition, it had 90,000 stock options outstanding, which had been granted to certain executives on June 30, 2020, and which gave them the right to purchase shares of Ferry's stock at an option price of $35 per share. The average market price of Ferry's common stock for 2020 was $50. Net income was $1,000,000. SHOW ALL COMPUTATIONS> Compute EPS. Compute DEPS.

Ferry Corporation had 300,000 shares of common stock outstanding at December 31, 2020. In addition,...