Question
On January 1, Year 7, Pepper Company purchased 6,000 of the 20,000 outstanding shares of Spice Companys voting common stock for $25 a share. Spruce
On January 1, Year 7, Pepper Company purchased 6,000 of the 20,000 outstanding shares of Spice Companys voting common stock for $25 a share. Spruce reports a net income of $450,000 for year 7. Spice declares $75,000 of dividends in year 7. The market value of Spice Company common stock is $28 a share on December 31, year 7.
Below is a list of account names to choose from to answer the journal entry questions below.
Cash | Dividends Receivable |
Common Stock | Investment in Pepper |
Dividend Revenue | Investment in Spice |
Dividend Declared | Investment Revenue |
Dividends Payable | None |
The level of influence that Pepper Company has over Spice Company is:
A. None
B. Insignificant
C. Significant
D. Controlling
Make the 1/1/Y7 journal entry on Peppers books to record the investment in Spice.
Account | Debit | Credit |
---------- | ||
---------- |
Make the Year 7 journal entry needed on Peppers books when Spice declares dividends.
Account | Debit | Credit |
---------- | ||
---------- |
Make the Year 7 journal entry needed on Peppers books when Spice reports Net Income.
Account | Debit | Credit |
---------- | ||
---------- |
Make the 12/31/Y7 journal entry needed on peppers books to recognize the change in the value of Spice Company shares.
Account | Debit | Credit |
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