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. Calculate the balance of Crake’s investment in Lagoon at December 31, 2019. Please solve correctly
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Crake Corporation paid $50,000 for a 10% interest in Lagoon Corp. on January 1, 2018, when Lagoon’s Lagoon’s net income and dividends for 2018 and 2019 were as follows: |
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2018 |
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2019 |
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Net income |
$30,000 |
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$70,000 |
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Dividends |
$10,000 |
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$20,000 |
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Required: |
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1. |
Prepare |
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2. |
Calculate the balance of Crake’s investment in Lagoon at December 31, 2019. Please solve correctly |
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