On January 2, 2006, Bradley Company acquired 20% of the 100,000 shares of outstanding common stock of

Question:

On January 2, 2006, Bradley Company acquired 20% of the 100,000 shares of outstanding of Caldecott Corp. for $20 per share. The purchase price was equal to Caldecott€™s underlying book value. Bradley plans to hold this stock to influence the activities of Caldecott.
The following data are applicable for 2006 and 2007:

On January 2, 2008, Bradley Company sold 5,000 shares of Caldecott stock for $24 per share. During 2008, Caldecott reported net income of $64,000, and on October 31, 2008, Caldecott paid dividends of $20,000. At December 31, 2008, after a significant stock market decline, which is expected to be temporary, Caldecott€™s stock was selling for $15 per share. After selling the 5,000 shares, Bradley does not expect to exercise significant influence over Caldecott, and the shares are classified as available for sale.

Instructions:
1. Make all journal entries for Bradley Company for 2006, 2007, and 2008, assuming the 20% original ownership interest allowed significant influence over Caldecott.
2. Make the year-end valuation adjusting entries for Caldecott Company for 2006, 2007, and 2008, assuming the 20% original ownership interest did not allow significant influence overCaldecott.

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...