Question
Hello my question is in the answer of part 1. QUESTION IS WHERE DOES THE 4000 AND 10,000 COME FROM ? 2) Pike Corporation paid
Hello my question is in the answer of part 1. QUESTION IS WHERE DOES THE 4000 AND 10,000 COME FROM ?
2) Pike Corporation paid $100,000 for a 10% interest in Salmon Corp. on January 1, 2013, when Salmon's stockholders' equity consisted of $800,000 of $10 par value common stock and $200,000 retained earnings. On December 31, 2014, after receipt of the year's dividends from Salmon, Pike paid $192,000 for an additional 20% interest in Salmon Corp. Both of Pike's investments were made when Salmon's book values equaled their fair values. Salmon's net income and dividends for 2013 and 2014 were as follows:
2013 2014
Net income $60,000 $140,000
Dividends $20,000 $40,000
Required:
1. Prepare journal entries for Pike Corporation to account for its investment in Salmon Corporation for 2013 and 2014.
Pike Corporation Journal Entries for 2013
1/1/2013 Investment in Salmon 100,000
Cash 100,000
12/31/2013 Cash 2,000
Dividend Income 2,000
Pike Corporation Journal Entries for 2014
12/31/2014 Cash 4,000
Dividend Income 4,000
12/31/2014 Investment in Salmon 192,000
Cash 192,000
12/31/2014 Investment in Salmon 14,000
Retained Earnings 14,000
Cost to Equity Basis Adjustment:
Beginning Retained Earnings 1/1/2013 $200,000
Add: Net Income 2013 60,000
Less: Dividends 2013 20,000
Ending Retained Earnings 12/31/2013 $240,000
Beginning Retained Earnings 1/1/2014 $240,000
Add: Net Income 2014 140,000
Less: Dividends 2014 40,000
Ending Retained Earnings 12/31/2013 $340,000
10% of Change in Retained Earnings Since 1/1/2013 ($4,000*10%+$10,000*10%) $ 14,000
QUESTION IS WHERE DOES THE 4000 AND 10,000 COME FROM ?
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