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.

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.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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.)
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