Question

Sandhill Inc. acquired 10% of the 420,000 shares of common stock of Schuberger Corporation at a total cost of $15 per share on June 17, 2020. On September 3, Schuberger declared and paid a $120,000 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.

Required:
Prepare all necessary journal entries for 2017 for (a) Edelman and (b) Wen.

Answer 1

Answer:Please see explantion colmn for answers

Step-by-step explanation:

A) Journal entry for Edelman

Date Account Titles and explanation Debit Credit

June 17 Stock investment $630,000

Cash $630,000

Calculation

Stock Investment =420,000 x $15 x 10% = $630,000

Date Account Titles and explanation Debit Credit

Sept 3 Cash $12,000

Dividend revenue $12,000

Calculation

Dividend revenue =$120,000 x 10% =$12,000

Date Account Titles and explanation Debit Credit

Dec 31 Stock investment $51,200

Investment revenue $51,200

Calculation

Investment Revenue =(512,000 x 10%) = 51,200

B) Journal entry for Wen

Date Account Titles and explanation Debit Credit

Jan 1 Stock investment $604,800

Cash $604,800

Calculation

Stock Investment =112,000 x $18 x 30% = $604,800

Date Account Titles and explanation Debit Credit

May 15 Cash $33,600

Dividend revenue $33,600

Calculation

Dividend revenue =112,000 x 30% = $33,600

Date Account Titles and explanation Debit Credit

Dec 31 Stock investment $63,600

Investment revenue $63,600

Calculation

Stock Investment =212,000 x 30% = $63,600