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8. Exercise 15-12 Securities transactions; equity method LO P4 Listed below are a few events and transactions...

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Accounting

8. Exercise 15-12 Securities transactions; equity method LOP4

Listed below are a few events and transactions of KodaxCompany.


2017

Jan.2Purchased 24,000shares of Grecco Co. common stock for $412,000 cash plus a broker’sfee of $3,400 cash. Grecco has 100,000 shares of common stockoutstanding, and its policies will be significantly influenced byKodax.
Sept.1Grecco declared andpaid a cash dividend of $1.90 per share.
Dec.31Grecco announcedthat net income for the year is $492,900.


2018

June1Grecco declared andpaid a cash dividend of $2.50 per share.
Dec.31Grecco announcedthat net income for the year is $710,400.
Dec.31Kodax sold 12,000shares of Grecco for $340,000 cash.


Prepare journal entries to record the above transactions and eventsof Kodax Company. (Do not round intermediate calculationsand round your final answers to the nearest dollaramount.)

Answer & Explanation Solved by verified expert
4.2 Ratings (720 Votes)

No:

Description

Debit $`

Credit $

2017

Jan

Long­term investments—Grecco

415400

Cash (412000+3400)

415400

Sep

Cash (24000*1.90)

45600

Long­term investments—Grecco

45600

Dec.

Long­term investments—Grecco

118296

Earnings from long­term investment

118296

(492900*24000/100,000)

2018

June

Cash (24000x2.50)

60000

Long­term investments—Grecco

60000

Dec.

Long­term investments—Grecco

170496

Earnings from long­term investment

170496

(710,400*24000/10000)

Dec.

Cash

340,000

Gain on sale of investment

40,704

Long­term investments—Grecco

299296

Working notes for the above answer is as under

Record sale of investment

original cost

415400

less 2017 dividends

-45600

add 2017 earnings

118296

less 2018 dividends

-60000

add 2018 earnings

170496

book value at date of sale

598592

Book value of share sold 598592/24000*12000

299,296

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