Problem

On January 1, 2014, Ironman, Inc. purchased 30% of the stock of a related party, Tony Stark Enterprises for $800,000 cash. ($20 per share) After the transaction, Ironman was able to exert significant influence over Stark. On December 1, 2014 Stark paid cash dividends of $120,000. Stark net income for the year ended December 31, 2014 was $400,000. On December 31, Stark stock was trading at $29 per share.

Instructions:

1. Prepare Ironmans journal entry to record the purchase of Starks stock.

2. Prepare Ironmans journal entries for December 1.

3. Prepare Ironmans December 31 entry (or entries).

4. Assume instead that Ironmans purchase resulted in a 10% ownership of Stark Enterprises, and Ironman classified the investment as available for sale. What would be the entries on December 1^st and 31^st?

2- Python Company leased equipment from Hope Leasing on January 1, 2016. Hope purchased the equipment at a cost of $222,666. Other information:

There is no expected residual value. Required: a. Prepare appropriate journal entries for Python for 2016. Assume straight-line depreciation and a December 31 year-end. b. Hope has accounted for this lease as a direct-financing lease. Hope also uses the gross amount of payments to account for the receivable. Prepare Hopes journal entries for 2016.