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
The following journal entries are needed:
1) purchase additional 30% of McKenzie's stock
2) Convert available for sale securities into investment in McKenzie Corporation
3) Adjust the investment 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
Homework Answers
Answer #1
Not the answer you're looking for?
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
$...
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
$...
On January 1, 2017, Palka, Inc., acquired 70 percent of the outstanding shares of Sellinger Company...
On January 1, 2017, Palka, Inc., acquired 70 percent of the
outstanding shares of Sellinger Company for $1,649,200 in cash. The
price paid was proportionate to Sellinger’s total fair value,
although at the acquisition date, Sellinger had a total book value
of $2,100,000. All assets acquired and liabilities assumed had fair
values equal to book values except for a patent (six-year remaining
life) that was undervalued on Sellinger’s accounting records by
$246,000. On January 1, 2018, Palka acquired an additional...
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...
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,...
ADVERTISEMENT
Need Online Homework Help?
Get Answers For Free
Most questions answered within 1 hours.
ADVERTISEMENT
Active Questions
asked 8 minutes ago
asked 20 minutes ago
asked 21 minutes ago
asked 46 minutes ago
asked 46 minutes ago
asked 53 minutes ago
asked 53 minutes ago
asked 58 minutes ago
asked 1 hour ago
asked 1 hour ago
asked 1 hour ago
asked 1 hour ago