On January 2, 2013, Weston Company acquired 20% of the 200,000 shares of outstanding common stock of
Question:
On January 2, 2013, Weston Company acquired 20% of the 200,000 shares of outstanding common stock of Startile Corp. for $18 per share. The purchase price was equal to Startile's underlying book value. Weston plans to hold this stock to influence the activities of Startile.
The following data are applicable for 2013 and 2014:
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On January 2, 2015, Weston Company sold 12,000 shares of Startile stock for $23 per share. During 2015, Startile reported net income of $80,000, and on October 31, 2015, Startile paid dividends of $22,000. At December 31, 2015, after a significant stock market decline, which is expected to be temporary, Startile's stock was selling for $14 per share. After selling the 12,000 shares, Weston does not expect to exercise significant influence over Startile, and the shares are classified as available for sale.
Instructions:
1. Make all journal entries for Weston Company for 2013, 2014, and 2015, assuming the 20% original ownership interest allowed significant influence over Startile.
2. Make the year-end valuation adjusting entries for Weston Company for 2013, 2014, and 2015, assuming the 20% original ownership interest did not allow significant influence over Startile.
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...
Step by Step Answer:
1 2013 Equity Method Jan 2 Investment in Startile Stock 720000 Cash 720000 200000 x 020 x 18 Oct 31 Cash 5600 Investment in Startile Stock 5600 28000 ...View the full answer
