Question
Pancake Corporation saw the potential for vertical integration and purchased a 15% interest in Syrup Corp. on January 1, 2013, for $150,000. At that date,
Pancake Corporation saw the potential for vertical integration and purchased a 15% interest in Syrup Corp. on January 1, 2013, for $150,000. At that date, Syrup's stockholders' equity included $200,000 of $10 par value common stock, $300,000 of additional paid in capital, and $500,000 retained earnings. The companies began to work together and realized improved sales by both parties. On December 31, 2014, Pancake paid $250,000 for an additional 20% interest in Syrup Corp. Both of Pancake's investments were made when Syrup's book values equaled their fair values. Syrup's net income and dividends for 2013 and 2014 were as follows: 2013 2014 Net income $220,000 $330,000 Dividends $20,000 $30,000 Part 1: Prepare journal entries for Pancake Corporation to account for its investment in Syrup Corporation for 2013 and 2014. Part 2: Calculate the balance of Pancake's investment in Syrup at December 31, 2014
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started