QS: 15-7 Problem On May 20, 2011 Alexis Co. paid $750,000to aquire $25,000 share

Question

QS: 15-7 Problem
On May 20, 2011 Alexis Co. paid $750,000to aquire $25,000 shares (10%) of TKR Corp. as a long-term investment. On Aug 5, 2012, ALexis sold one-half of these shares for $475,000.

QS: 15-8 Problem
Assume the same facts as in 15-7 except that the stock aquired represents 40% of TKR Corp's outstanding stock. Also assume thatt TKR Corp. paid a $125,000 dividend on Nov 1, 2011 and reported a net income of $550,000 for 2011. Prepare the journal entries to record (a) the reciept of the dividend and (b) the Dec 31, 2011, year-end adjustment required for the investment account.

Explanation / Answer

QS: 15-7 Problem On May 20, 2011 Alexis Co. paid $750,000to acquire 25,000 shares (10%) of TKR Corp. as a long-term investment. On Aug 5, 2012, ALexis sold one-half of these shares for $475,000. Investments - TKR Corp. DEBIT 750000 Cash CREDIT 750000 Cash DEBIT 475000 Investments CREDIT 375000 Gain on sale of investments CREDIT 100000 QS: 15-8 Problem Assume the same facts as in 15-7 except that the stock aquired represents 40% of TKR Corp's outstanding stock. Also assume thatt TKR Corp. paid a $125,000 dividend on Nov 1, 2011 and reported a net income of $550,000 for 2011. Prepare the journal entries to record (a) the reciept of the dividend and (b) the Dec 31, 2011, year-end adjustment required for the investment account. a) Cash DEBIT 50000 Investment in TKR Corp CREDIT 50000 b) Investment in TKR Corp DEBIT 220000 Income from investments CREDIT 220000

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