Felicia Company acquired 21,000 of the 60,000 shares of outstanding common stock
ID: 2371771 • Letter: F
Question
Felicia Company acquired 21,000 of the 60,000 shares of outstanding common stock of Nueces Corporation during 2010 as a long-term investment. The annual accounting period for both companies ends December 31. The following transactions occurred during 2010: Jan. 10 Purchased 21,000 shares of Nueces common stock at $12 per share. Dec. 31 Nueces Corporation reported net income of $90,000. Dec. 31 Nueces Corporation declared and paid a cash dividend of $0.60 per share. Dec. 31 Determined the market price of Nueces stock to be $11 per share. Requirement 2: Give the journal entries for each of these transactions. (Enter the transactions in the order given in the question. Omit the "$" sign in your response.) Requirement 3: Show how the long-term investment and the related revenue should be reported on the 2010 financial statements of Felicia Company. (Omit the "$" sign in your response.) Balance Sheet-At December 31, 2010 Long-term Investments $ Income Statement-For the Year Ended December 31, 2010 $Explanation / Answer
Jan 10 2010
investment in aasociated companies(+A) 252000 (21000/60000 *12)
cash..............................................................................................252000
December 31 2010
investment in aasociated companies(+A) 31500 (90,000*0.35)
Equity in earnings of associated company(+R,+SE).............31500
December 31 2010
cash(+A)..................................................................12600 (21000 * 0.6)
investment in aasociated companies(-.A)................................12600
Requirement 3
Balance sgeet at December 31 ,2010
Long term investement
investment in aasociated companies (equity basis).............270,900
Income Statement for year END december 31 , 2010
equity in earnings of associated companies...........................31500
Investment in Associated companies
Cost ................................252000
Investee's Net income.... 31500
Investee dividend declared 12600
TOTal.......................................270900
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