On January 1, Year 5, Jump Company purchased 10,000 shares of Skip Inc. (total shares issued 15,000) for $60,000 and uses the equity method to account for its investment in Skip Inc. On the acquisition date, acquisition differential totalled $12,000 all allocated to capital assets with aremaining useful life of 6 years. During Year 5, Skip had net income of $26,000 (earned evenly over the year) and on May 1,Year 5, paid dividends of $6,000. On October 1, Year 5, Jump sold 1,000 of the 10,000 shares that it held in Skip for proceeds of $7,500. Required (show all work for full marks) a) Prepare the Jump's journal entry for the sale of the shares on October 1, Year 5. b) What will the balance in the investment account be at December 31, Year 5?
On January 1, Year 5, Jump Company purchased 10,000 shares of Skip Inc. (total shares issued 15,000) for $60,000 and uses the equity method to account for its investment in Skip Inc. On the acquisition date, acquisition differential totalled $12,000 all allocated to capital assets with aremaining useful life of 6 years. During Year 5, Skip had net income of $26,000 (earned evenly over the year) and on May 1,Year 5, paid dividends of $6,000. On October 1, Year 5, Jump sold 1,000 of the 10,000 shares that it held in Skip for proceeds of $7,500. Required (show all work for full marks) a) Prepare the Jump's journal entry for the sale of the shares on October 1, Year 5. b) What will the balance in the investment account be at December 31, Year 5?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On January 1, Year 5, Jump Company purchased 10,000 shares of Skip Inc. (total shares
issued 15,000) for $60,000 and uses the equity method to account for its investment in Skip
Inc. On the acquisition date, acquisition differential totalled $12,000 all allocated to capital
assets with aremaining useful life of 6 years.
During Year 5, Skip had net income of $26,000 (earned evenly over the year) and on May
1,Year 5, paid dividends of $6,000. On October 1, Year 5, Jump sold 1,000 of the 10,000
shares that it held in Skip for proceeds of $7,500.
Required (show all work for full marks)
a) Prepare the Jump's journal entry for the sale of the shares on October 1, Year 5.
b) What will the balance in the investment account be at December 31, Year 5?
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