Exercise 17-16 cember 31 2018. Kulika ski ounder1ne. acqured 20% cf the outstand

Question

Exercise 17-16 cember 31 2018. Kulika ski ounder1ne. acqured 20% cf the outstanding c mon stock of Theresa Kuiko ski Inc. on December 31 2017. The purchase price was 1 097 800 for 49,900 shares Kulikowski nc. declared and pad an $0.85 per share cash dividend on June 30 and on reported net income of $769,000 for 2018. The fair value of Kul kowski's stock was $25 per share at December 31, 2018. Assume that the security is o trading security. Prepare the jaurnal entris for Flounder Inc. for 2017 and 2018, auming that Flounder cannot axercise significant innuance over Kulikowsld. (Credit account titfes are automatically indonted when amount is entered. Do not indent manually. Ifno ontry is roquired, select "No Entry" for the account titles and enter 0 for the amounts.) Founden denter o for entry the amnsg Date Account Titles and Explanation Debit Credit To racord dhidend.) To recand air value) Prepare the journal entries for Flounder Inc. for 2017 and 2018, assuming that Plounder can exercise significent influence over Kulikonski. (Credit account titles are automatically indented when amount is entered. Do not indent manually, If no entry is required, select "No Entry for the aecount titlas and enter O for the amounts.) itiea and entero for the Date Account Titles and ExplanationDebit Credit record dvidend) To record revenue)

Explanation / Answer

a. Journal Entry ( No Significant Influence) Date Account tittle & Explanation Debit Credit 31/12/2017 Available for Sale Securities $1,007,800.00 Cash $1,007,800.00 Being 49900 Share was purchsed 30/06/2018 Cash $42,415.00 Dividend Income $42,415.00 ( Being Dividedn received, 49900 Share @ $0.85/Share) 31/12/2018 Cash $42,415.00 Dividend Income $42,415.00 ( Being Dividedn received, 49900 Share @ $0.85/Share) 31/12/2018 Securities Fair Value adjustment $239,700.00 Unrealized holding gain or Loss - Equity $239,700.00 Being Unrealized gain/Loss recorded( $25- (1007800/49900))*49900 b. . Journal Entry ( having Significant Influence) Date Account tittle & Explanation Debit Credit 31/12/2017 Investment in Thoroca Inc. $1,007,800.00 Cash $1,007,800.00 Being 49900 Share was purchsed 30/06/2018 Cash $42,415.00 Investment in Thoroca Inc. $42,415.00 ( Being Dividedn received, 49900 Share @ $0.85/Share) 31/12/2018 Cash $42,415.00 Investment in Thoroca Inc. $42,415.00 ( Being Dividedn received, 49900 Share @ $0.85/Share) 31/12/2018 Investment in Thoroca Inc. $153,800.00 Profit On Investment $153,800.00 (Being Investment adjusted with Net Income proportion, $769000*20%) c. Fair Value Method Equity Method Investment Amount $1,247,500.00 $1,076,700.00 ( 49900*$25) (1007800-42415-42415+153800) Dividend Revenue $84,830.00 $84,830.00 Investment Income $239,700.00 $153,800.00

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