Question
On 01/01/2014, Company Big (B) acquired 25% of Company Small (S)s shares. To acquire the shares, B paid $10,000,000 cash. In 2015, S made a
On 01/01/2014, Company Big (B) acquired 25% of Company Small (S)s shares. To acquire the shares, B paid $10,000,000 cash. In 2015, S made a net profit of $4,000,000, announced and gave out 1,000,000 cash dividend. The share price of S were $15 per share at 01/01/2014 and $18 per share at 12/31/2014.
a)For the transaction happened on 01/01/2014, please write down the journal entries for B (5 points)
b)For the transaction happened on 01/01/2014, please write down the journal entries for S (5 points)
c)Assuming that B has no significant influence over S, what accounting method should B use to document their investment? And what are the journal entries that are related to the investment and investing activities during 2014 for B, in other words, what is the balance of investment account at the end of 2014 for B? And what are the journal entries to document the changes in investment account? (8 points)
d)Assuming that B controls S, what accounting method should B use to document their investment? And what are the journal entries that are related to the investment and investing activity during 2014 for B? In other words, what is the balance of investment account at the end of 2014 for B? And what are the journal entries to document the changes in investment account? (8 points)
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