Packard Inc. is a public company. On January 1, 2020 Packard Inc. purchased 10,000 common shares (15%) of Saturn Inc. for $115,000 in cash. Saturn had common shares of $225,000 and retained earnings of $475,000 on this date. Packard considered Saturn a FVTPL investment; as it did not give Packard significant influence. On December 31, 2020 the Saturn shares were trading at $13.00 per share. On January 1, 2021, Packard purchased an additional 25% of Saturn's shares for $217,000 in cash. This second purchase allowed Packard to exert significant influence over Saturn. The following information was available on the date of acquisition: Carrying Value Fair Value Assets not subject to depreciation $205,000 Assets subject to depreciation (10 year useful life) 750,000 Patent (7 year useful life) 35,000 Liabilities 115,000 115,000 Saturn depreciates assets using the straight-line method and has a 35% tax rate. During the two years, Saturn reported the following: Dividends Declared $275,000 $75,000 $175,000 $115,000 Additional Information Saturn pays any dividends declared in cash on January 1 of the subsequent year. On December 31, 2021, an impairment test revealed that Packard's share of Saturn's goodwill was impaired by $10,000. The 2021 net income included a loss from discontinued operations of $40,000 (net of tax). REQUIRED: Prepare all of Packard's journal entries for 2020 and 2021 related to Packard's investment in Saturn. Net Income 2020 2021 $205,000 620,000
Packard Inc. is a public company. On January 1, 2020 Packard Inc. purchased 10,000 common shares (15%) of Saturn Inc. for $115,000 in cash. Saturn had common shares of $225,000 and retained earnings of $475,000 on this date. Packard considered Saturn a FVTPL investment; as it did not give Packard significant influence. On December 31, 2020 the Saturn shares were trading at $13.00 per share. On January 1, 2021, Packard purchased an additional 25% of Saturn's shares for $217,000 in cash. This second purchase allowed Packard to exert significant influence over Saturn. The following information was available on the date of acquisition: Carrying Value Fair Value Assets not subject to depreciation $205,000 Assets subject to depreciation (10 year useful life) 750,000 Patent (7 year useful life) 35,000 Liabilities 115,000 115,000 Saturn depreciates assets using the straight-line method and has a 35% tax rate. During the two years, Saturn reported the following: Dividends Declared $275,000 $75,000 $175,000 $115,000 Additional Information Saturn pays any dividends declared in cash on January 1 of the subsequent year. On December 31, 2021, an impairment test revealed that Packard's share of Saturn's goodwill was impaired by $10,000. The 2021 net income included a loss from discontinued operations of $40,000 (net of tax). REQUIRED: Prepare all of Packard's journal entries for 2020 and 2021 related to Packard's investment in Saturn. Net Income 2020 2021 $205,000 620,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Packard Inc. is a public company. On January 1, 2020 Packard Inc. purchased
10,000 common shares (15%) of Saturn Inc. for $115,000 in cash. Saturn had
common shares of $225,000 and retained earnings of $475,000 on this date.
Packard considered Saturn a FVTPL investment; as it did not give Packard
significant influence. On December 31, 2020 the Saturn shares were trading at
$13.00 per share.
On January 1, 2021, Packard purchased an additional 25% of Saturn's shares for
$217,000 in cash. This second purchase allowed Packard to exert significant
influence over Saturn. The following information was available on the date of
acquisition:
Carrying Value Fair
Value
Assets not subject to depreciation
$205,000
Assets subject to depreciation (10 year useful life)
750,000
Patent (7 year useful life)
35,000
Liabilities
115,000
115,000
Saturn depreciates assets using the straight-line method and has a 35% tax
rate.
During the two years, Saturn reported the following:
Dividends Declared
$275,000
$75,000
$175,000
$115,000
Additional Information
Saturn pays any dividends declared in cash on January 1 of the subsequent year.
On December 31, 2021, an impairment test revealed that Packard's share of
Saturn's goodwill was impaired by $10,000.
The 2021 net income included a loss from discontinued operations of $40,000
(net of tax).
REQUIRED:
Prepare all of Packard's journal entries for 2020 and 2021 related to Packard's
investment in Saturn.
Net Income
2020
2021
$205,000
620,000
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education