Question 2 Natalie has been approached by Ken Thornton, a shareholder of The Deanery Coffee Ine, ker wants to retire and would like to sell is 1,000 shares in The Beanery Coffee, which represents 30% of all shares issued. The Beanery is currently operated by Ken's twin daughters, who each own 35% of the common shares. The Beangry not only operates a coffee shop but also rests and set beans to retailers, under the name "Rocky Mountain Banery." The business has been operating for approximately 5 years. In the last 2 years Ken has lost interest and let the day to day operations to his daughters. Both daughters at times find the work at the coffee shop overwhelming. They would like to have a third shareholder involved to take over some of the responsibilities of running a small business. Both feel that Natalie and Curtis are entrepreneurial in spirit and that their expertise would be a welcome addition to the business operation. The twins have also said that they plan to operate this business for another 10 years and then Ken has met with Curtis and Natalie to discuss the business operation. All have concluded that there would be many advantages for Cookie & Coffee Creations Inc, to acquire an interest in The Beanery Coffee. One of the major advantages would be volume discounts for purchases of the coffee bean inventory Despite the apparent advantages, however, Natalie and Curtis are not convinced that they should participate in this business venture Assume that ken wants to sell is 1,000 shares of The Beanery Coffee for $15,000 Prepare the journal entry required Cod Coffee Creation Inc. buy Ken's shares. Carne entry is required, select "Ne Entry for the account titles and anter for the amounts. Cred account titles are automatically indented when amount is entered. De not indent manually.) Account Tities and Explanation Debit Credit Assume that Cookie & Coffee Creations Inc. buys the shares and in the following year The Beanery Coffee earns $50,000 net income and pays $25,000 in dividends. Prepare the journal entries required under both the cost method and the equity method of accounting for this investment (Ind entry is required, select "No Entry" for the account titles and enter for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Debit Account Titles and Explanation Cost Method: Credit Equity Method: (To record equity in Beanery's net income) (To record dividends received) LINK TO TEXT UNK TO TEXT Identify where this investment would be classified on the balance sheet of Cookie & Coffee Creations Inc. Investment would be classified as a in balance sheet SHOW LIST OF ACCOUNTS What amount would appear on the balance sheet under each of the methods of accounting for the investment? Cost method Equity methods Click if you would like to Show Work for this question: Open Show Work SHOW LIST OF ACCOUNTS LINK TO TEXT LINK TO TEXT Questio F4
