Wellman Company acquired 30% of the outstanding common stock of Grinwold Inc. on January 1, 2017, by
Question:
Wellman Company acquired 30% of the outstanding common stock of Grinwold Inc. on January 1, 2017, by paying $1,800,000 for 60,000 shares. Grinwold declared and paid a $0.50 per share cash dividend on June 30 and again on December 31, 2017. Grinwold reported net income of $800,000 for the year.
Instructions
(a) Prepare the journal entries for Wellman Company for 2017, assuming Wellman cannot exercise significant influence over Grinwold. (Use the cost method.)
(b) Prepare the journal entries for Wellman Company for 2017, assuming Wellman can exercise significant influence over Grinwold. (Use the equity method.)
(c) The board of directors of Wellman Company is confused about the differences between the cost and equity methods. Prepare a memorandum for the board that explains each method and shows in tabular form the account balances under each method at December 31, 2017.
Common StockCommon stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
Step by Step Answer:
a 2017 Jan 1 Stock Investments 1800000 Cash 1800000 June 30 Cash 30000 Dividend Revenue 60000 X 050 ...View the full answer
Accounting Tools for Business Decision Making
ISBN: 978-1118096895
6th edition
Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso
