Question

Old Enterprises Inc. acquired 10% of the 100,000 outstanding common shares of New Ltd. on January...

Old Enterprises Inc. acquired 10% of the 100,000 outstanding common shares of New Ltd. on January 1, 2018 for a cash consideration of $100,000.

New Ltd. Earned income of $150,000 in 2018 and $180,000 in 2019 (evenly over both years) and paid a regular annual dividend of $120,000 in December each year.


Old Enterprises does not have significant influence over New Ltd. and elected when it first acquired its initial investment in New Ltd.to account for this investment through other comprehensive income. The company's shares were trading for $11 at the end of 2018 and $12.50 at the end of 2019.

In 2020, Old acquired another 10% shares of New for a cash consideration of $130,000. By that Old gained significant influence over New Ltd. Income earned and dividend paid by New Ltd. for year 2020 are as follows:

Income from operation                                   $ 300,00

Less: Loss from discontinued operation           50,000

Net income                                                      250,000

Other comprehensive income (net)                  30,000

Total comprehensive income                          280,000

Divided paid $ 200,000 for year 2020 by New Ltd.

Prepare dated journal entries for Old Enterprises for 2018,2019 and 2020.

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1
In Books of Old Enterprises Ltd.
Sr. No. Particulars Debit Credit
2018 Equity shares in New Ltd. A/c   1,00,000.00
To cash    1,00,000.00
2018 Cash A/c      12,000.00
To dividend from New Ltd A/c        12,000.00
2019 Cash A/c      12,000.00
To dividend from New Ltd A/c        12,000.00
2020 Equity shares in New Ltd. A/c   1,30,000.00
To cash    1,30,000.00
2020 Cash A/c      40,000.00
To dividend from New Ltd A/c        40,000.00
0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Old Enterprises Inc. acquired 10% of the 100,000 outstanding common shares of New Ltd. on January...
Old Enterprises Inc. acquired 10% of the 100,000 outstanding common shares of New Ltd. on January 1, 2018 for a cash consideration of $100,000. New Ltd. Earned income of $150,000 in 2018 and $180,000 in 2019 (evenly over both years) and paid a regular annual dividend of $120,000 in December each year. Old Enterprises does not have significant influence over New Ltd. and elected when it first acquired its initial investment in New Ltd.to account for this investment through other...
Indigo Inc acquired 130,000 common shares, which is 25% of the outstanding common shares, of Tahiti...
Indigo Inc acquired 130,000 common shares, which is 25% of the outstanding common shares, of Tahiti Ltd. on January 1, 2020 for $767,000. At the time of purchase, Tahiti Ltd. depreciable assets were undervalued by $32,200. The depreciable assets had a remaining useful life of 5 years with no salvage value. Tahiti Ltd. declared and paid a cash dividend of $0.30 per share on July 31, 2020. Tahiti Ltd. reported $1.1 million as net income on December 31, 2020 for...
Q3. During January 2019, Mindy, Inc. acquired 30% of the outstanding common stock of Milton Co....
Q3. During January 2019, Mindy, Inc. acquired 30% of the outstanding common stock of Milton Co. for $1,500,000. This investment gave Mindy the ability to exercise significant influence over Milton. Milton’s assets on that date were recorded at $6,400,000 with liabilities of $3,000,000. Any excess of cost over book value of Mindy’ investment was attributed to unrecorded patents having a remaining useful life of ten years. In 2019, Milton reported net income of $600,000. For 2020, Milton reported net income...
Skysong Inc. acquired 20% of the outstanding common stock of Theresa Kulikowski Inc. on December 31,...
Skysong Inc. acquired 20% of the outstanding common stock of Theresa Kulikowski Inc. on December 31, 2017. 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, 2018. Kulikowski reported net income of $699,000 for 2018. The fair value of Kulikowski’s stock was $27 per share at December 31, 2018. Assume that the security is a trading security. Instructions (a)   Prepare the journal entries...
On 1 July 2019 ABC Ltd acquired 50 000 shares in DEF Ltd at a price...
On 1 July 2019 ABC Ltd acquired 50 000 shares in DEF Ltd at a price of $20 each. There were brokerage fees of $1000. The closing market price of DEF Ltd shares on 30 June 2020 which is the entity’s financial year end was $24. ABC Ltd has not made the election to account for its equity investments at fair value through Other Comprehensive Income. Required: Prepare the relevant journal entries for ABC Ltd to account for the investment...
ON JANUARY 2, 2020, RAMS CORP. ACQUIRED 30% OF THE OUTSTANDING COMMON STOCK OF COLTS CO....
ON JANUARY 2, 2020, RAMS CORP. ACQUIRED 30% OF THE OUTSTANDING COMMON STOCK OF COLTS CO. FOR $2,000,000. THIS ACQUISITION GAVE THE RAMS THE ABILITY TO EXERCISE SIGNIFICANT INFLUENCE OVER THE INVESTEE. THE 100% BOOK VALUE OF THE ACQUIRED SHARES WAS $4,500,000. ANY EXCESS COST OVER THE UNDERLYING BOOK VALUE WAS ASSIGNED TO A PATENT THAT WAS UNDERVALUED ON THE COLT'S BALANCE SHEET. THIS PATENT HAS A REMAINING USEFUL LIFE OF TEN YEARS. FOR THE YEAR ENDED DECEMBER 31, 2020,...
A company had 400,000 common shares outstanding during 2020. It also had 100,000 shares of 8%,...
A company had 400,000 common shares outstanding during 2020. It also had 100,000 shares of 8%, $100 par nonconvertible and cumulative preferred stock outstanding for the entire year of 2020. The company did not declare and pay a preferred dividend in 2019 and 2020. It earned net income of $16,000,000 during 2020. Compute basic earnings per share for 2020. Round to the nearest penny if necessary.
On January 3, 2018, Matteson Corporation acquired 40 percent of the outstanding common stock of O’Toole...
On January 3, 2018, Matteson Corporation acquired 40 percent of the outstanding common stock of O’Toole Company for $1,304,000. This acquisition gave Matteson the ability to exercise significant influence over the investee. The book value of the acquired shares was $917,000. Any excess cost over the underlying book value was assigned to a copyright that was undervalued on its balance sheet. This copyright has a remaining useful life of 10 years. For the year ended December 31, 2018, O’Toole reported...
In January 2020, Domingo, Inc., acquired 20 percent of the outstanding common stock of Martes, Inc.,...
In January 2020, Domingo, Inc., acquired 20 percent of the outstanding common stock of Martes, Inc., for $877,000. This investment gave Domingo the ability to exercise significant influence over Martes, whose balance sheet on that date showed total assets of $4,594,000 with liabilities of $984,000. Any excess of cost over book value of the investment was attributed to a patent having a remaining useful life of 10 years. In 2020, Martes reported net income of $235,000. In 2021, Martes reported...
On January 1, Year 5, Blake Corporation purchased 25% of the outstanding common shares of Stergis...
On January 1, Year 5, Blake Corporation purchased 25% of the outstanding common shares of Stergis Limited for $2,150,000. The following relates to Stergis since the acquisition date: Year Net Income Other Comprehensive Income Dividends Paid Year 5 $ 60,200 $12,600 $86,000 Year 6 172,000 34,400 86,000 Required: (a) Assume that Blake is a public company and the number of shares held by Blake is enough to give it significant influence over Stergis. Prepare all the journal entries that Blake...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT