Exercise 17-16 Jaycie Phelps Inc. acquired 30% of the outstanding common stock o
ID: 2475583 • Letter: E
Question
Exercise 17-16
Jaycie Phelps Inc. acquired 30% of the outstanding common stock of Theresa Kulikowski Inc. on December 31, 2013. The purchase price was $1,574,100 for 58,300 shares. Kulikowski Inc. declared and paid an $0.75 per share cash dividend on June 30 and on December 31, 2014. Kulikowski reported net income of $802,600 for 2014. The fair value of Kulikowski’s stock was $30 per share at December 31, 2014.
(a) Prepare the journal entries for Jaycie Phelps Inc. for 2013 and 2014, assuming that Phelps cannot exercise significant influence over Kulikowski. The securities should be classified as available-for-sale. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Date
Account Titles and Explanation
Debit
Credit
Dec. 31, 2013
June 30, 2014
Dec. 31, 2014
(To record dividend.)
(To record fair value.)
(b) Prepare the journal entries for Jaycie Phelps Inc. for 2013 and 2014, assuming that Phelps can exercise significant influence over Kulikowski. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Date
Account Titles and Explanation
Debit
Credit
Dec. 31, 2013
June 30, 2014
Dec. 31, 2014
(To record dividend.)
(To record revenue.)
(c) At what amount is the investment in securities reported on the balance sheet under each of these methods at December 31, 2014? What is the total net income reported in 2014 under each of these methods?
Fair Value Method
Equity Method
Date
Account Titles and Explanation
Debit
Credit
Dec. 31, 2013
June 30, 2014
Dec. 31, 2014
(To record dividend.)
(To record fair value.)
Explanation / Answer
a. Journal Entries:
b. Journal Entries:
c.
Date Account Name Debit Credit Dec 31, 2013 Available for Sale Securities 1574100 Cash 1574100 June 30, 2014 Dividend Receivable 43725 Dividend Income 43725 June 30, 2014 Cash 43725 Dividend Receivable 43725 Dec 31, 2014 Dividend Receivable 43725 Dividend Income 43725 Dec 31, 2014 Cash 43725 Dividend Recivable 43725 Dec 31, 2014 Available for Sale Securities 174900 Unrealized gain on available for sale securities [(30-27)x58300] 174900Related Questions
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