On January 3, 2020, Gladstone Corporation purchased 30% of the outstanding voting common stock of Hancock Company for $610,000. This purchase gave Gladstone the ability to exercise significant influence over the operating and financial policies of Hancock. On the date of purchase, Hancock's books reported assets of $3,000,000 and liabilities of $800,000. Any excess of cost over book value of Gladstone's investment was attributed to a patent with a remaining useful life of ten years. During 2020, Hancock reported net income of $295,000 and declared and paid cash dividends of $80,000. In the following year, 2021, Hancock reported net income of $325,000 and declared and paid cash dividends of $75,000. In 2020, Gladstone sold inventory costing $55,000 to Hancock for $70,000. Hancock sold 65% of that inventory to outsiders during 2020 with the remainder being sold in 2021. During 2021, Gladstone sold inventory costing $45,000 to Hancock for $85,000. Hancock sold 90% of that inventory to outsiders during 2021. Prepare all of Gladstone's journal entries for 2020 to apply the equity method.
On January 3, 2020, Gladstone Corporation purchased 30% of the outstanding voting common stock of Hancock Company for $610,000. This purchase gave Gladstone the ability to exercise significant influence over the operating and financial policies of Hancock. On the date of purchase, Hancock's books reported assets of $3,000,000 and liabilities of $800,000. Any excess of cost over book value of Gladstone's investment was attributed to a patent with a remaining useful life of ten years. During 2020, Hancock reported net income of $295,000 and declared and paid cash dividends of $80,000. In the following year, 2021, Hancock reported net income of $325,000 and declared and paid cash dividends of $75,000.
In 2020, Gladstone sold inventory costing $55,000 to Hancock for $70,000. Hancock sold 65% of that inventory to outsiders during 2020 with the remainder being sold in 2021. During 2021, Gladstone sold inventory costing $45,000 to Hancock for $85,000. Hancock sold 90% of that inventory to outsiders during 2021.
Prepare all of Gladstone's
Step by step
Solved in 2 steps
