2) Pike Corporation paid $100,000 for a 10% interest in Salmon Corp. on January 1,2013, when Salmon's stockholders' equity consisted of $800,000 of $10 par valuecommon stock and $200,000 retained earnings. On December 31, 2014, afterreceipt of the year's dividends from Salmon, Pike paid $192,000 for an additional20% interest in Salmon Corp. Both of Pike's investments were made when Salmon'sbook values equaled their fair values. Salmon's net income and dividends for 2013and 2014 were as follows:Net incomeDividendsRequired:2013$60,000$20,0002014$140,000$40,0001. Prepare journal entries for Pike Corporation to account for its investment inSalmon Corporation for 2013 and 2014.2. Calculate the balance of Pike's investment in Salmon at December 31, 2014.

Journal entries are a record of the business transaction in the books of business.Balance of…

Answered: 2) Pike Corporation paid $100,000 for a…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Crake Corporation paid $50,000 for a 10% interest in Lagoon Corp. on January 1, 2018, when Lagoon’s stockholders’ equity consisted of $400,000 of $10 par value common stock and $100,000 retained earnings. On December 31, 2019, Crake paid $96,000 for an additional 20% interest in Lagoon Corp. Both of Crake’s investments were made when Lagoon’s book values equaled their fair values. Crake Corporation determines that cumulative dividends for 2019exceed its cumulative share of income by $200, and the 2018 investment in Lagoon Corp fair value increased to $55,000 On December 31, 2019. Lagoon’s net income and dividends for 2018 and 2019 were as follows: 2018 2019 Net income $30,000 $70,000 Dividends $10,000 $20,000 Required: 1. Prepare journal entries for Crake Corporation to account for its investment in Lagoon Corporation for 2018 and 2019. 2.…
On March 15, 2021, Smith Corp. (Smith) purchased 18,000 common shares of Costa Inc. (CI) for $72,000, plus transaction costs of $6,000. Smith elected to record the shares of Cl at fair value through other comprehensive income. On July 15, 2021, Smith received a $1.50 per share dividend. At December 31, 2021, the fair value of Cl's shares was $7.00 per share. On February 15, 2022, all the shares of CI were sold for $12.00 per share due to the favourable market rate of the shares. Smith's policy is to transfer the net balance of accumulated other comprehensive income to retained earnings upon derecognition of the investment in Cl's shares. Smith reports under IFRS. Required: a) Prepare all journal entries necessary for the investment-related transactions in 2021. b) Prepare all journal entries necessary for the sale of the shares on February 15, 2022.
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