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Presented below are two independent situations:
(a) Edelman Inc. acquired 10% of the 412,000 shares of common stock of Schuberger Corporation at a total cost of $12 per share on June 17, 2017. On September 3, Schuberger declared and paid a $112,000 dividend. On December 31, Schuberger reported net income of $512,000 for the year.
(b) Wen Corporation obtained significant influence over Hunsaker Company by buying 30% of Hunsaker’s 112,000 outstanding shares of common stock at a cost of $18 per share on January 1, 2017. On May 15, Hunsaker declared and paid a cash dividend of $112,000. On December 31, Hunsaker reported net income of $212,000 for the year.
Prepare all necessary journal entries for 2017 for (a) Edelman and (b) Wen.

Sagot :

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Answer:

a. Date    Accounts title                   Debit ($)       Credit ($)

June 17 Stock investment              494,400

                (412,000*$12*10%)

                     Cash                                                494,400

Sept.3      Cash                                  11,200

                ($112,000*10%)

                      Dividend revenue                          11,200

Dec. 31  Stock investments            51,200

                ($512,000*10%)

                       Investment revenue          51,200

b. Date Account title                     Debit ($) Credit ($)

Jan.1 Stock Investment              604,800

               (112,000*$18*30%)

                      Cash                                                 604,800

May 15 Cash                                    33,600

               ($112,000*30%)

                       Stock Investment                            33,600

Dec. 31    Stock investments              63,600

               ($212,000 *30%)

                       Investment revenue                         63,600

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