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Presented below are two independent situations:

(a) Edelman Inc. acquired 10% of the 412,000 shares of common stock of Schuberger Corporation at a total cost of $12 per share on June 17, 2017. On September 3, Schuberger declared and paid a $112,000 dividend. On December 31, Schuberger reported net income of $512,000 for the year.
(b) Wen Corporation obtained significant influence over Hunsaker Company by buying 30% of Hunsaker’s 112,000 outstanding shares of common stock at a cost of $18 per share on January 1, 2017. On May 15, Hunsaker declared and paid a cash dividend of $112,000. On December 31, Hunsaker reported net income of $212,000 for the year.
Prepare all necessary journal entries for 2017 for (a) Edelman and (b) Wen.

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Answer:

a. Date Accounts title Debit ($) Credit ($)

June 17 Stock investment 494,400

(412,000*$12*10%)

Cash 494,400

Sept.3 Cash 11,200

($112,000*10%)

Dividend revenue 11,200

Dec. 31 Stock investments 51,200

($512,000*10%)

Investment revenue 51,200

b. Date Account title Debit ($) Credit ($)

Jan.1 Stock Investment 604,800

(112,000*$18*30%)

Cash 604,800

May 15 Cash 33,600

($112,000*30%)

Stock Investment 33,600

Dec. 31 Stock investments 63,600

($212,000 *30%)

Investment revenue 63,600

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