Felicia Company acquired some of the 55,000 shares of outstanding common stock (
ID: 2389883 • Letter: F
Question
Felicia Company acquired some of the 55,000 shares of outstanding common stock (no par) of Nueces Corporation during 2010 as a long-term investment. The annual accounting period for both companies ends December 31. The following transactions occurred during 2010:
(Click to select)Market value methodEquity method
Prepare the journal entries for each of these transactions. (In cases where no entry is required, please select the option "No journal entry required" for your answer to grade correctly. Leave no cells blank - be certain to enter "0" wherever required. Round your answers to the nearest dollar amount.)
Show how the long-term investment and the related revenue should be reported in the 2010 financial statements of the company. (Round your answers to the nearest dollar amount. Omit the "$" sign in your response.)
Note : this assignment will be automatically submitted to your instructor on the due date even if your work is incomplete.
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Felicia Company acquired some of the 55,000 shares of outstanding common stock (no par) of Nueces Corporation during 2010 as a long-term investment. The annual accounting period for both companies ends December 31. The following transactions occurred during 2010:
Explanation / Answer
Requirement 1: Equity Methode. Working: Nueces total Outstanding stock = 55000 Shares Feliciea purchased Common stock = 17600 Shares Percentage of Share = 17600 / 55000 * 100 = 32% Nueces total Outstanding stock = 55000 Shares Feliciea purchased Common stock = 17600 Shares Percentage of Share = 17600 / 55000 * 100 = 32% If company had 20% - 50% of stock it has to use Equity Methode. Now Feliciea has 32% share so we have to use Equity methode. Requirement 2: Entries: Dr $ Cr $ 10-Jan-10 Investment in Nueces Stock 230560 Cash 230560 (To purchased stock in Nueces company) 31-Dec-10 No Entry for net income 31-Dec-10 Cash 11616 Investment in Nueces Stock 11616 (To cash dividend received) 31-Dec-10 Unrealized Loss on investments 36960 Investment in Nueces Stock 36960 (To record in decrease in fair value of Investment) Requirement 3: To record in Balance sheet: Dec 10,2010 Long Term Investments: Investment in Nueces Stock = $193,600 Working: Purchased Cost (17600 * 13.1) = $230,560 Less: Decreased in purchased price(17600 * 2.1) = $36,960 Market Value (17600 * 11) = $193,600 To Record in Income Statement: Other Items: Equity in Investee Earnings: Dividends Received (17600 * 0.66) = $11,616 Expenses Side: Unrealized loss on Necess Investments (17600 * 2.1) = $36,960 Adjusted Loss (36960 - 11616) = $25,344 Thank you.... Entries: Dr $ Cr $ 10-Jan-10 Investment in Nueces Stock 230560 Cash 230560 (To purchased stock in Nueces company) 31-Dec-10 No Entry for net income 31-Dec-10 Cash 11616 Investment in Nueces Stock 11616 (To cash dividend received) 31-Dec-10 Unrealized Loss on investments 36960 Investment in Nueces Stock 36960 (To record in decrease in fair value of Investment) Requirement 3: To record in Balance sheet: Dec 10,2010 Long Term Investments: Investment in Nueces Stock = $193,600 Working: Purchased Cost (17600 * 13.1) = $230,560 Less: Decreased in purchased price(17600 * 2.1) = $36,960 Market Value (17600 * 11) = $193,600 To Record in Income Statement: Other Items: Equity in Investee Earnings: Dividends Received (17600 * 0.66) = $11,616 Expenses Side: Unrealized loss on Necess Investments (17600 * 2.1) = $36,960 Adjusted Loss (36960 - 11616) = $25,344 Thank you.... Nueces total Outstanding stock = 55000 Shares Feliciea purchased Common stock = 17600 Shares Percentage of Share = 17600 / 55000 * 100 = 32%Related Questions
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