Denger Kingbird Donald Inc. acquired 20% of the outstanding common stock of Theresa Ivanhoe Inc. on December 31, 2025. The purchaseprice was $1,205,000 for 48,200 shares. Ivanhoe Inc. declared and paid an $0.85 per share cash dividend on June 30 and on December31, 2026. Ivanhoe reported net income of $692,000 for 2026. The fair value of Ivanhoe's stock was $28 per share at December 31,2026. Assume that the security is a trading security.(a)Prepare the journal entries for Kingbird Donald Inc. for 2025 and 2026, assuming that Donald cannot exercise significantinfluence over Ivanhoe. (List all debit entries before credit entries. Credit account titles are automatically indented when amount isentered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Record journalentries in the order presented in the problem.)DateAccount Titles and ExplanationDebitCredit

Let's examine each journal entry in greater detail: 2025: For a total purchase price of $1,205,000,…

Answered: Kingbird Donald Inc. acquired 20% of…

Financial Accounting

14th Edition

ISBN:9781305088436

Author:Carl Warren, Jim Reeve, Jonathan Duchac

Publisher:Carl Warren, Jim Reeve, Jonathan Duchac

Chapter15: Investments And Fair Value Accounting

Section: Chapter Questions

Problem 28E

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Vaughn Joseph Inc. acquired 20% of the outstanding common stock of Theresa Carla Vista Inc. on December 31, 2025. The purchase price was $1,294,800 for 49,800 shares. Carla Vista Inc. declared and paid an $0.75 per share cash dividend on June 30 and on December 31, 2026. Carla Vista reported net income of $764,000 for 2026. The fair value of Carla Vista's stock was $29 per share at December 31, 2026. Assume that the security is a trading security. (a) Prepare the journal entries for Vaughn Joseph Inc. for 2025 and 2026, assuming that Joseph cannot exercise significant influence over Carla Vista. (List all debit entries before credit entries. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Debit Credit
Pharoah Co. acquired 25% of the 530,000 shares of outstanding common stock of Bloom Inc. on December 31, 2025. The purchase price was $3,657,000. Bloom declared and paid $1.30 per share cash dividends on June 18, 2026, and on November 29, 2026. Bloom reported net income of $1,260,000 for 2026. The fair value of Bloom common stock was $27 per share at December 31, 2026. (a) Prepare the journal entries for Pharoah Co. for 2026, assuming that Pharoah cannot exercise significant influence over Bloom. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Debit Credit
Potsaid Company acquired 30% of the outstanding common stock of Buyuk Inc. on December 31, 2025. The purchase price was $2,400,000 for 100,000 shares. Buyuk declared and paid a $4 per share cash dividend on June 30 and December 31, 2026. Buyuk reported net income of $1,460, 000 for 2026. The fair value of Buyuk's stock was $27 per share at December 31, 2026. INSTRUCTIONS a. Prepare the journal entries for Potsaid for 2025 and 2026, assuming that Potsaid cannot exercise significant influence over Buyuk. b. Prepare the journal entries for Potsaid for 2025 and 2026, assuming that Potsaid can exercise significant influence over Buyuk.
Heidebrecht Design acquired 25% of the outstanding common stock of Sunland Company on January 1, 2022, by paying $854,000 for the 42,700 shares. Sunland declared and paid $0.30 per share cash dividends on March 15, June 15, September 15, and December 15, 2022. Sunland reported net income of $390,500 for the year. At December 31, 2022, the market price of Sunland common stock was $26 per share. (a) Prepare the journal entries for Heidebrecht Design for 2022 assuming Heidebrecht Design cannot exercise significant influence over Sunland. (Use the cost method.) (Record journal entries in the order presented in the problem. List all debit entries before credit entries. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter O for the amounts.) Date Account Titles and Explanation Debit Credit
Sarasota Inc. acquired 20% of the outstanding common stock of Theresa Kulikowski Inc. on December 31, 2020. The purchase price was $1,097,800 for 49,900 shares. Kulikowski Inc. declared and paid an $0.85 per share cash dividend on June 30 and on December 31, 2021. Kulikowski reported net income of $769,000 for 2021. The fair value of Kulikowski’s stock was $25 per share at December 31, 2021. Assume that the security is a trading security. Prepare the journal entries for Sarasota Inc. for 2020 and 2021, assuming that Sarasota cannot exercise significant influence over Kulikowski. Date Account Titles and Explanation Debit Credit Dec. 31, 2020 June 30, 2021 Dec. 31, 2021 (To record dividend.) (To record fair value.) At what amount is the investment in securities reported on the balance sheet under each of these methods at December 31, 2021? What is the…
Novak Inc. acquired 20% of the outstanding common stock of Theresa Kulikowski Inc. on December 31, 2020. The purchase price was $1,214,400 for 52,800 shares. Kulikowski Inc. declared and paid an $0.80 per share cash dividend on June 30 and on December 31, 2021. Kulikowski reported net income of $768,000 for 2021. The fair value of Kulikowski’s stock was $26 per share at December 31, 2021. Assume that the security is a trading security. At what amount is the investment in securities reported on the balance sheet under each of these methods at December 31, 2021? What is the total net income reported in 2021 under each of these methods? Fair Value Method Equity Method Investment amount (balance sheet) $ $ Dividend revenue (income statement) Unrealized holding gain (income statement) Investment income (income statement)
Waterway Inc. acquired 20% of the outstanding common stock of Theresa Kulikowski Inc. on December 31, 2020. The purchase price was $1,170,000 for 46,800 shares. Kulikowski Inc. declared and paid an $0.90 per share cash dividend on June 30 and on December 31, 2021. Kulikowski reported net income of $802,000 for 2021. The fair value of Kulikowski's stock was $28 per share at December 31, 2021. (a) Prepare the journal entries for Waterway Inc. for 2020 and 2021, assuming that Waterway cannot exercise significant influence over Kulikowski. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Novak Inc. acquired 20% of the outstanding common stock of Theresa Kulikowski Inc. on December 31, 2020. The purchase price was $1,214,400 for 52,800 shares. Kulikowski Inc. declared and paid an $0.80 per share cash dividend on June 30 and on December 31, 2021. Kulikowski reported net income of $768,000 for 2021. The fair value of Kulikowski’s stock was $26 per share at December 31, 2021. Assume that the security is a trading security. Prepare the journal entries for Novak Inc. for 2020 and 2021, assuming that Novak cannot exercise significant influence over Kulikowski. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Date Account Titles and Explanation Debit Credit Dec. 31, 2020June 30, 2021Dec. 31, 2021…
Novak Inc. acquired 20% of the outstanding common stock of Theresa Kulikowski Inc. on December 31, 2020. The purchase price was $1,214,400 for 52,800 shares. Kulikowski Inc. declared and paid an $0.80 per share cash dividend on June 30 and on December 31, 2021. Kulikowski reported net income of $768,000 for 2021. The fair value of Kulikowski’s stock was $26 per share at December 31, 2021. Assume that the security is a trading security. Prepare the journal entries for Novak Inc. for 2020 and 2021, assuming that Novak can exercise significant influence over Kulikowski. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Date Account Titles and Explanation Debit Credit Dec. 31, 2020June 30, 2021Dec. 31, 2021…
Heidebrecht Design acquired 30% of the outstanding common stock of Oriole Company on January 1, 2020, by paying $684,000 for the 45,600 shares. Oriole declared and paid $0.60 per share cash dividends on March 15, June 15, September 15, and December 15, 2020. Oriole reported net income of $356,000 for the year. At December 31, 2020, the market price of Oriole common stock was $26 per share. Prepare the journal entries for Heidebrecht Design for 2020 assuming Heidebrecht Design cannot exercise significant influence over Oriole. (Record journal entries in the order presented in the problem. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.) Date Account Titles and Explanation Debit Credit Jan. 1Mar. 15June 15Sept. 15Dec. 15Dec. 31…
Pronghorn Inc. acquired 20% of the outstanding common stock of Theresa Kulikowski Inc. on December 31, 2020. The purchase price was $1,243,200 for 51,800 shares. Kulikowski Inc. declared and paid an $0.75 per share cash dividend on June 30 and on December 31, 2021. Kulikowski reported net income of $786,000 for 2021. The fair value of Kulikowski's stock was $27 per share at December 31, 2021.
Shamrock Inc. acquired 20% of the outstanding common stock of Theresa Kulikowski Inc. on December 31, 2020. The purchase price was $ 1,245,600 for 51,900 shares. Kulikowski Inc. declared and paid an $ 0.85 per share cash dividend on June 30 and on December 31, 2021. Kulikowski reported net income of $ 699,000 for 2021. The fair value of Kulikowski’s stock was $ 27 per share at December 31, 2021.

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