Question

Austin, Inc., acquired 10 percent of McKenzie Corporation on January 1, 2014 for $313,400. During 2014,...

Austin, Inc., acquired 10 percent of McKenzie Corporation on January 1, 2014 for $313,400. During 2014, McKenzie earned a net income of $287,000 while declaring and paying cash dividends of $108,000. On January 1, 2015, Austin purchased an additional 30 percent of McKenzie for $932,700. The initial 10 percent investment had been maintained at fair value, and the fair value of McKenzie on January 1, 2015 is implied by the second purchase. The equity method will now be applied. During 2015, McKenzie reported income of $368,250 and declared and paid dividends of $138,000. Write the Journal entries that Austin needs to make during year 2015. Note that Austin needs to (1) switch from Fair Value Method to Equity Method on 1/1/2015, and (2) carry the investment in McKenzie in Equity Method afterwards Requirement:

Need the following transactions journalized:

1) Purchase additional 30% of McKenzie's stock

2) Convert available-for-sale securities into Investment in McKenzie Corporation

3) Adjust the investment account to reflect the investee's equity

4) Eliminate the unrealized holding gain under Fair Value Method

5) Recognize McKenzie's Net Income during 2015

6) Record McKenzie's Dividends paid in 2015

use the following list of accounts: Cash, Inventory, Available-for-sale Securities, Trading Securities, Investment in McKenzie Corp., Equity in McKenzie’s Income, Fair Value Adjustments of SAFS, Accumulated Fair Value Adjustments (AOCI), Net Income, Retained Earnings.

Please post and label each entry. Thank you.

Homework Answers

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Austin, Inc., acquired 10 percent of McKenzie Corporation on January 1, 2014 for $313,400. During 2014,...
Austin, Inc., acquired 10 percent of McKenzie Corporation on January 1, 2014 for $313,400. During 2014, McKenzie earned a net income of $287,000 while declaring and paying cash dividends of $108,000. On January 1, 2015, Austin purchased an additional 30 percent of McKenzie for $932,700. The initial 10 percent investment had been maintained at fair value, and the fair value of McKenzie on January 1, 2015 is implied by the second purchase. The equity method will now be applied. During...
Austin, Inc., acquired 10 percent of McKenzie Corporation on January 1, 2014 for $313,400. During 2014,...
Austin, Inc., acquired 10 percent of McKenzie Corporation on January 1, 2014 for $313,400. During 2014, McKenzie earned a net income of $287,000 while declaring and paying cash dividends of $108,000. On January 1, 2015, Austin purchased an additional 30 percent of McKenzie for $932,700. The initial 10 percent investment had been maintained at fair value, and the fair value of McKenzie on January 1, 2015 is implied by the second purchase. The equity method will now be applied. During...
Austin, Inc., acquired 10 percent of McKenzie Corporation on January 1, 2014 for $313,400. During 2014,...
Austin, Inc., acquired 10 percent of McKenzie Corporation on January 1, 2014 for $313,400. During 2014, McKenzie earned a net income of $287,000 while declaring and paying cash dividends of $108,000. On January 1, 2015, Austin purchased an additional 30 percent of McKenzie for $932,700. The initial 10 percent investment had been maintained at fair value, and the fair value of McKenzie on January 1, 2015 is implied by the second purchase. The equity method will now be applied. During...
Austin, Inc., acquired 10 percent of McKenzie Corporation on January 1, 2014 for $313,400. During 2014,...
Austin, Inc., acquired 10 percent of McKenzie Corporation on January 1, 2014 for $313,400. During 2014, McKenzie earned a net income of $287,000 while declaring and paying cash dividends of $108,000. On January 1, 2015, Austin purchased an additional 30 percent of McKenzie for $932,700. The initial 10 percent investment had been maintained at fair value, and the fair value of McKenzie on January 1, 2015 is implied by the second purchase. The equity method will now be applied. During...
On January 1, 2018, Alamar Corporation acquired a 43 percent interest in Burks, Inc., for $192,000....
On January 1, 2018, Alamar Corporation acquired a 43 percent interest in Burks, Inc., for $192,000. On that date, Burks's balance sheet disclosed net assets with both a fair and book value of $327,000. During 2018, Burks reported net income of $83,000 and declared and paid cash dividends of $25,000. Alamar sold inventory costing $22,000 to Burks during 2018 for $39,000. Burks used all of this merchandise in its operations during 2018. Prepare all of Alamar's 2018 journal entries to...
Chapman Company obtains 100 percent of Abernethy Company’s stock on January 1, 2014. As of that...
Chapman Company obtains 100 percent of Abernethy Company’s stock on January 1, 2014. As of that date, Abernethy has the following trial balance: Debit Credit   Accounts payable $ 56,700      Accounts receivable $ 43,800   Additional paid-in capital 50,000      Buildings (net) (4-year life) 143,000   Cash and short-term investments 80,250   Common stock 250,000      Equipment (net) (5-year life) 295,000   Inventory 110,500   Land 112,000   Long-term liabilities (mature 12/31/17) 171,000      Retained earnings, 1/1/14 268,750      Supplies 11,900      Totals $ 796,450 $...
Equity Method On January 1, 2014, The Miller Corporation purchased 300,000 shares of The Mayfair Corporation...
Equity Method On January 1, 2014, The Miller Corporation purchased 300,000 shares of The Mayfair Corporation for $5.7 million. The investment represented 25 percent of The Mayfair Corporation’s outstanding common shares. During 2014, Mayfair reported net earnings of $2.25 million and paid a cash dividend of $0.15 per share. During 2015, Mayfair reported a net loss of $180,000 and again paid a dividend of $0.15 per share. Calculate the book value of Miller’s investment in Mayfair as of December 31,...
On January 1, 2014, Ridge Road Company acquired 25 percent of the voting shares of Sauk...
On January 1, 2014, Ridge Road Company acquired 25 percent of the voting shares of Sauk Trail, Inc. for $4,000,000 in cash. Both companies provide commercial Internet support services but serve markets in different industries. Ridge Road made the investment to gain access to Sauk Trail’s board of directors and thus facilitate future cooperative agreements between the two firms. Ridge Road quickly obtained several seats on Sauk Trail’s board which gave it the ability to significantly influence Sauk Trail’s operating...
Placid Lake Corporation acquired 80 percent of the outstanding voting stock of Scenic, Inc., on January...
Placid Lake Corporation acquired 80 percent of the outstanding voting stock of Scenic, Inc., on January 1, 2014, when Scenic had a net book value of $400,000. Any excess fair value was assigned to intangible assets and amortized at a rate of $5,000 per year. Placid Lake’s 2015 net income before consideration of its relationship with Scenic (and before adjustments for intra-entity sales) was $300,000. Scenic reported net income of $110,000. Placid Lake declared $100,000 in dividends during this period;...
Chapman Company obtains 100 percent of Abernethy Company’s stock on January 1, 2014. As of that...
Chapman Company obtains 100 percent of Abernethy Company’s stock on January 1, 2014. As of that date, Abernethy has the following trial balance: Debit Credit   Accounts payable $ 54,100      Accounts receivable $ 48,500   Additional paid-in capital 50,000      Buildings (net) (4-year life) 130,000   Cash and short-term investments 66,000   Common stock 250,000      Equipment (net) (5-year life) 437,500   Inventory 109,000   Land 89,000   Long-term liabilities (mature 12/31/17) 178,500      Retained earnings, 1/1/14 358,800      Supplies 11,400      Totals $ 891,400 $...