Question

Heidebrecht Design acquired 25% of the outstanding common stock of Cullumber Company on January 1, 2020, by paying $802,000 for the 40,100 shares. Cullumber declared and paid $0.20 per share cash dividends on March 15, June 15, September 15, and December 15, 2020. Cullumber reported net income of $344,500 for the year. At December 31, 2020, the market price of Cullumber common stock was $26 per share.

Prepare the journal entries for Heidebrecht Design for 2020, assuming Heidebrecht Design can exercise significant influence over Cullumber. Use the equity method. (Record journal entries in the order presented in the problem. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.)

Answer 1

January 1, 2020

Dr Stock Investments $802,000

Cr Cash $802,000

March 15

Dr Cash $8,020

Cr Stock Investments $8,020

June 15

Dr Cash $8,020

Cr Stock Investments $8,020

September 15

March 15

Dr Cash $8,020

Cr Stock Investments $8,020

December 15

March 15

Dr Cash $8,020

Cr Stock Investments $8,020

December 31

Dr Stock Investments $86,125

Cr Revenue for Stock Investments $86,125

Step-by-step explanation:

Preparation of the journal entries for Heidebrecht Design for 2020, assuming Heidebrecht Design can exercise significant influence over Cullumber

January 1, 2020

Dr Stock Investments $802,000

Cr Cash $802,000

March 15

Dr Cash $8,020

Cr Stock Investments $8,020

(40,100 shares*$0.20)

June 15

Dr Cash $8,020

Cr Stock Investments $8,020

(40,100 shares*$0.20)

September 15

March 15

Dr Cash $8,020

Cr Stock Investments $8,020

(40,100 shares*$0.20)

December 15

March 15

Dr Cash $8,020

Cr Stock Investments $8,020

(40,100 shares*$0.20)

December 31

Dr Stock Investments $86,125

Cr Revenue for Stock Investments $86,125

($344,500*25%)