PREPARING JOURNAL ENTRIES Part A On January 2, 2017, Kesha Company purchased 10,000 shares of the stock of...
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PREPARING JOURNAL ENTRIES
Part A
On January 2, 2017, Kesha Company purchased 10,000shares of the stock of Petty Corp., and did not obtain significantinfluence. The investment is intended as a long-terminvestment. The stock was purchased for $5 per share, andrepresents a 10% ownership stake. Petty Corp made $20,000 of netincome in 2017, and paid dividends of $5,000 on December 15, 2017.On December 31, 2017, Petty Corp's stock was trading on the openmarket for $8 per share at the end of the year. Use thisinformation to prepare the General Journal entry(ies) for January 2purchase and the December 15 & 31, 2017 record of income &gain/loss. If no entry is required then write "No EntryRequired."
Part B
On January 1, 2017, Kesha Company purchased asignificant influence shares investment in the Winehouse Companyfor $250,000. This investment balance represents 40% ofthe equity of the Winehouse Company. During 2017,Winehouse Company reported Net Income of $25,000 on November 15,2017 Winehouse Company paid cash dividends of $10,000 to itsshareholders. Use this information to prepare the January 1,November 15 and December 31, 2017 General Journal entry (withoutexplanation.) If no entry is required, then write "No EntryRequired."
PREPARING JOURNAL ENTRIES
Part A
On January 2, 2017, Kesha Company purchased 10,000shares of the stock of Petty Corp., and did not obtain significantinfluence. The investment is intended as a long-terminvestment. The stock was purchased for $5 per share, andrepresents a 10% ownership stake. Petty Corp made $20,000 of netincome in 2017, and paid dividends of $5,000 on December 15, 2017.On December 31, 2017, Petty Corp's stock was trading on the openmarket for $8 per share at the end of the year. Use thisinformation to prepare the General Journal entry(ies) for January 2purchase and the December 15 & 31, 2017 record of income &gain/loss. If no entry is required then write "No EntryRequired."
Part B
On January 1, 2017, Kesha Company purchased asignificant influence shares investment in the Winehouse Companyfor $250,000. This investment balance represents 40% ofthe equity of the Winehouse Company. During 2017,Winehouse Company reported Net Income of $25,000 on November 15,2017 Winehouse Company paid cash dividends of $10,000 to itsshareholders. Use this information to prepare the January 1,November 15 and December 31, 2017 General Journal entry (withoutexplanation.) If no entry is required, then write "No EntryRequired."
Answer & Explanation Solved by verified expert
Part-(A)
| Date | General Jounal | Debit | Credit |
| 02.Jan.2017 | By Investment in Petty Corp | 50,000 | |
| To Bank A/c | 50,000 | ||
| (Being Shares purchased in petty corp 10000*5) | |||
| 15.Dec.2017 | By Bank a/c | 500 | |
| To Dividend Revenue | 500 | ||
| (Being dividend received for 10% stake in petty corp) | |||
| (No entry for recording income of petty corp) | |||
| 31.Dec.2017 | By Investment in Petty Corp | 30,000 | |
| To Realized gain on Investments | 30,000 | ||
| (being realized gain of 3 per shae (10000*3) | |||
Part-(B)
| Date | General Jounal | Debit | Credit |
| 01.Jan.2017 | By Investment in associates | 250,000 | |
| To Bank A/c | 250,000 | ||
| (Being 40 % Shares of winwhouse purchased) | |||
| 15.Nov.2017 | By Investment in associates | 10,000 | |
| To Revenue from Investments | 10,000 | ||
| (To record 40% of Winehouse Net Income) | |||
| 31.Dec.2017 | By Bank a/c | 4,000 | |
| To Investment in associates | 4,000 | ||
| (To record dividend received from Winhouse) | |||
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