er 15-HOMEWORK x3-6,8,10-12,14,168176 Exercise 15-12 Securities transactions; eq
ID: 2553181 • Letter: E
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er 15-HOMEWORK x3-6,8,10-12,14,168176 Exercise 15-12 Securities transactions; equity method LO P4 Listed below are a few events and transactions of Kodax Company 2017 3an. 2 Purchased 24,000 shares of Grecco Co. common stock for $412,090 cash plus a broker's fee of s3 108,000 shares of common stock outstanding, and its policies will be significantly infl Sept. 1 Grecco declared and paid a cash dividend of $1.98 per share. Dec. 31 Grecco announced that net income for the year is $492,900. 2018 June 1 Grecco declared and paid a cash dividend of $2.5e per share. Dec. 31 Grecco announced that net income for the year is $718,480 Dec. 33 Kodax sold 12,000 shares of Grecco for $34e,000 cash. Prepare journal entries to record the above transactions and events of Kodax Company. (Do not round intermediate calculations and round your final a to the nearest dollor amount.) Journal entry worksheetExplanation / Answer
Solution: Date General Journal Debit Credit Jan. 2, 2017 Long-Term Investments—Grecco 415,400 Cash 415,400 Working Notes: Long-Term Investments—Grecco 415,400 [cash $412,000 + brokerage $3400] Cash 415,400 Since, policy will be affected by Kodax , it should use Equity method. Date General Journal Debit Credit Sept. 1, 2017 Cash 45,600 Long-Term Investments—Grecco 45,600 Working Notes: Cash dividend received =(24,000 × $1.90) = $45,600 Date General Journal Debit Credit Dec. 31, 2017 Long-Term Investments—Grecco 118,296 Earnings from long-term investment 118,296 Working Notes: Share in Grecco Earnings = ($492,900 × (24,000/100,000)) = $118,296 Date General Journal Debit Credit Jan. 01, 2018 Cash 60,000 Long-Term Investments—Grecco 60,000 Working Notes: Cash dividend received =(24,000 × $2.50) = $60,000 Date General Journal Debit Credit Dec. 31, 2018 Long-Term Investments—Grecco 170,496 Earnings from long-term investment 170,496 Working Notes: Share in Grecco Earnings = ($710,400 × (24,000/100,000)) = $170,496 Date General Journal Debit Credit Dec. 31, 2018 Cash 340,000 Long-Term Investments—Grecco 299,296 Gain on sale of investment 40,704 Working Notes: Cash 340,000 [Amount received] Long-Term Investments—Grecco 299,296 Gain on sale of investment 40,704 [cash 340,000 - Book value 299,296] Computation of book value of investment on date of sale Purchase cost 415,400 Less: Dividend of 2017 -45,600 Add: Share in Grecco Earnings 2017 118,296 Less: Dividend of 2018 -60,000 Add: Share in Grecco Earnings 2018 170,496 Book value of investment on 31 Dec. 2018 598,592 Book value of part of investment sold 299,296 [598,592 x (12,000/24,000) ] Please feel free to ask if anything about above solution in comment section of the question.
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