Harper, Incorporated, acquires 40 percent of the outstanding voting stock of Kinman Company on January 1, 2023, for $320,500 in cash. The book value of Kinman's net assets on that date was $620,000, although one of the company's buildings, with a $78,400 carrying amount, was actually worth $133,650. This building had a 10-year remaining life. Kinman owned a royalty agreement with a 20-year remaining life that was undervalued by $126,000. Kinman sold inventory with an original cost of $79,800 to Harper during 2023 at a price of $114,000. Harper still held $20,550 (transfer price) of this amount in inventory as of December 31, 2023. These goods are to be sold to outside parties during 2024. Kinman reported a $56,400 net loss and a $22,200 other comprehensive loss for 2023. The company still manages to declare and pay a $30,000 cash dividend during the year. During 2024, Kinman reported a $61,000 net income and declared and paid a cash dividend of $32,000. It made additional inventory sales of $128,000 to Harper during the period. The original cost of the merchandise was $80,000. All but 30 percent of this inventory had been resold to outside parties by the end of the 2024 fiscal year. Required: Prepare all journal entries for Harper for 2023 and 2024 in connection with this investment. Assume that the equity method is applied. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations. View transaction list Journal entry worksheet < 16 6 7 8 9 10 11 12 Record the deferred unrealized gross profit on intra-entity sale. Note: Enter debits before credits. Date General Journal Debit Credit 12/31/2024 Equity in Investee income Investment in Kinman Company
Harper, Incorporated, acquires 40 percent of the outstanding voting stock of Kinman Company on January 1, 2023, for $320,500 in cash. The book value of Kinman's net assets on that date was $620,000, although one of the company's buildings, with a $78,400 carrying amount, was actually worth $133,650. This building had a 10-year remaining life. Kinman owned a royalty agreement with a 20-year remaining life that was undervalued by $126,000. Kinman sold inventory with an original cost of $79,800 to Harper during 2023 at a price of $114,000. Harper still held $20,550 (transfer price) of this amount in inventory as of December 31, 2023. These goods are to be sold to outside parties during 2024. Kinman reported a $56,400 net loss and a $22,200 other comprehensive loss for 2023. The company still manages to declare and pay a $30,000 cash dividend during the year. During 2024, Kinman reported a $61,000 net income and declared and paid a cash dividend of $32,000. It made additional inventory sales of $128,000 to Harper during the period. The original cost of the merchandise was $80,000. All but 30 percent of this inventory had been resold to outside parties by the end of the 2024 fiscal year. Required: Prepare all journal entries for Harper for 2023 and 2024 in connection with this investment. Assume that the equity method is applied. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations. View transaction list Journal entry worksheet < 16 6 7 8 9 10 11 12 Record the deferred unrealized gross profit on intra-entity sale. Note: Enter debits before credits. Date General Journal Debit Credit 12/31/2024 Equity in Investee income Investment in Kinman Company
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter13: Investments And Long-term Receivables
Section: Chapter Questions
Problem 8MC
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Transcribed Image Text:Harper, Incorporated, acquires 40 percent of the outstanding voting stock of Kinman Company on January 1, 2023, for $320,500 in
cash. The book value of Kinman's net assets on that date was $620,000, although one of the company's buildings, with a $78,400
carrying amount, was actually worth $133,650. This building had a 10-year remaining life. Kinman owned a royalty agreement with a
20-year remaining life that was undervalued by $126,000.
Kinman sold inventory with an original cost of $79,800 to Harper during 2023 at a price of $114,000. Harper still held $20,550 (transfer
price) of this amount in inventory as of December 31, 2023. These goods are to be sold to outside parties during 2024.
Kinman reported a $56,400 net loss and a $22,200 other comprehensive loss for 2023. The company still manages to declare and
pay a $30,000 cash dividend during the year.
During 2024, Kinman reported a $61,000 net income and declared and paid a cash dividend of $32,000. It made additional inventory
sales of $128,000 to Harper during the period. The original cost of the merchandise was $80,000. All but 30 percent of this inventory
had been resold to outside parties by the end of the 2024 fiscal year.
Required:
Prepare all journal entries for Harper for 2023 and 2024 in connection with this investment. Assume that the equity method is applied.
Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round
intermediate calculations.
View transaction list
Journal entry worksheet
<
16
6
7
8
9
10
11
12
Record the deferred unrealized gross profit on intra-entity sale.
Note: Enter debits before credits.
Date
General Journal
Debit
Credit
12/31/2024 Equity in Investee income
Investment in Kinman Company
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