Consolidated Petroleum Industries (CPI) is a newly formed oil drilling company, with intentions to drill for crude oil off the coast of Alaska. CPI's accounting year ends on December 31. The following events or transactions took place during the period of January 1, 2015, to December 31, 2016. On January 3, 2015, I purchased 30% of the outstanding common stock of Alaska Refinery Inc. or 30,000 shares out of a total outstanding of 100,000 shares. The investment was accounted for by CPI using the Equity Method of accounting. CPI paid $500,000 for the 30% interest. on December 31, 2015, Alaska Refinery Inc. reported its results of operations for the year ended December 31, 2015. Sales totaled $10,000,000 cost of sales totaled 7,000,000 expenses were $2,000,000. Net income was $1,000,000. On January 2, 2106, Alaska Refinery Inc. paid a cash dividend to all shareholders of record on December 31, 2015. The cash dividend was $100,000. On December 15, 2016, CPI speculated on the stock of a small oil company named CAT Inc. CPI purchased 1,000 shares of CAT Inc. at $30 per share. On December 16, 2016, CPI purchased 1,000 shares of General Industries Inc. at $40 per share. On December 21, 2016, CPI sold half its position (500 shares) of CAT Inc. for $28 per share. On December 22, 2016, CPI received a cash dividend of $0.75 per share on its investment in General Industries Inc. On December 26, 2016, sold 200 shares of General Industries Inc. at $45 per share. On December 31, 2016, Alaska Refinery Inc. reported its results of operations for the year ended December 31, 2016. Sales totaled $11,000,000, cost of sales totaled 8,000,000 expenses were 3,500,000. Alaska Refinery Inc. reported a net loss of $500,000. On December 31, 2016, CPI received a check for $500 from CAT Inc. representing a dividend. Additional Information The following schedule shows the market price per share of each of the foregoing companies on December 31, 2016: Alaska Refinery $20 CAT Inc $25 General Industries Inc. $50 Directions Prepare the journal entries for CPI to record the above-mentioned events. Prepare any adjusting journal entries to mark-to-market open investment positions at year-end.
Consolidated Petroleum Industries (CPI) is a newly formed oil drilling company, with intentions to drill for crude oil off the coast of Alaska. CPI's accounting year ends on December 31. The following events or transactions took place during the period of January 1, 2015, to December 31, 2016.
On January 3, 2015, I purchased 30% of the outstanding common stock of Alaska Refinery Inc. or 30,000 shares out of a total outstanding of 100,000 shares. The investment was accounted for by CPI using the Equity Method of accounting. CPI paid $500,000 for the 30% interest.
on December 31, 2015, Alaska Refinery Inc. reported its results of operations for the year ended December 31, 2015. Sales totaled $10,000,000 cost of sales totaled 7,000,000 expenses were $2,000,000. Net income was $1,000,000.
On January 2, 2106, Alaska Refinery Inc. paid a cash dividend to all shareholders of record on December 31, 2015. The cash dividend was $100,000.
On December 15, 2016, CPI speculated on the stock of a small oil company named CAT Inc. CPI purchased 1,000 shares of CAT Inc. at $30 per share.
On December 16, 2016, CPI purchased 1,000 shares of General Industries Inc. at $40 per share.
On December 21, 2016, CPI sold half its position (500 shares) of CAT Inc. for $28 per share.
On December 22, 2016, CPI received a cash dividend of $0.75 per share on its investment in General Industries Inc.
On December 26, 2016, sold 200 shares of General Industries Inc. at $45 per share.
On December 31, 2016, Alaska Refinery Inc. reported its results of operations for the year ended December 31, 2016. Sales totaled $11,000,000, cost of sales totaled 8,000,000 expenses were 3,500,000. Alaska Refinery Inc. reported a net loss of $500,000.
On December 31, 2016, CPI received a check for $500 from CAT Inc. representing a dividend.
Additional Information
The following schedule shows the market price per share of each of the foregoing companies on December 31, 2016:
Alaska Refinery $20
CAT Inc $25
General Industries Inc. $50
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