2. Cristal Corporation paid $50,000 for a 10% interest in Luna Corp. on January 1, 2014, whenLuna's stockholders' equity consisted of $400,000 of $10 par value common stock and $100,000retained earnings. On December 31, 2015, Cristal paid $96,000 for an additional 20% interest inLuna Corp. Both of Cristal's investments were made when Luna's book values equaled their fairvalues. Luna's net income and dividends for 2014 and 2015 were as follows:Net incomeDividends2014$30,000$10,0002015$70,000$20,000Required:a. Prepare journal entries for Cristal Corporation to account for its investment in LunaCorporation for 2014 and 2015.b. Calculate the balance of Cristal's investment in Luna at December 31, 2015.

Name: 2. Cristal Corporation paid $50,000 for a 10% interest in Luna Corp.
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Description: 2. Cristal Corporation paid $50,000 for a 10% interest in Luna Corp. on January 1, 2014, whenLuna's stockholders' equity consisted of $400,000 of $10 par value common stock and $100,000retained earnings. On December 31, 2015, Cristal paid $96,000 fo

Acquiring a partial ownership stake in a company, such as 10% or 20%, involves purchasing a portion…

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a. Prepare journal entries for Cristal Corporation to account for its investment in Luna Corporation for 2014 and 2015. b. Calculate the balance of Cristal's investment in Luna at December 31, 2015.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Concept explainers

Financial Transaction Analysis

The transaction analysis is done with the help of the accounting equation. The basic accounting equation is alternatively known as the balance sheet equation is based on the double-entry system which says that for each transaction happening in a business, at least two accounts should be affected I.e. both the debit side and the credit side should be equal. The Accounting Equation is

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Question

2. Cristal Corporation paid $50,000 for a 10% interest in Luna Corp. on January 1, 2014, when
Luna's stockholders' equity consisted of $400,000 of $10 par value common stock and $100,000
retained earnings. On December 31, 2015, Cristal paid $96,000 for an additional 20% interest in
Luna Corp. Both of Cristal's investments were made when Luna's book values equaled their fair
values. Luna's net income and dividends for 2014 and 2015 were as follows:
Net income
Dividends
2014
$30,000
$10,000
2015
$70,000
$20,000
Required:
a. Prepare journal entries for Cristal Corporation to account for its investment in Luna
Corporation for 2014 and 2015.
b. Calculate the balance of Cristal's investment in Luna at December 31, 2015.

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