Question 6 Heidebrecht Design acquired 30% of the outstanding common stock of Qu
ID: 2415588 • Letter: Q
Question
Question 6
Heidebrecht Design acquired 30% of the outstanding common stock of Quayle Company on January 1, 2014, by paying $779,400 for the 43,300 shares. Quayle declared and paid $0.40 per share cash dividends on March 15, June 15, September 15, and December 15, 2014. Quayle reported net income of $377,700 for the year. At December 31, 2014, the market price of Quayle common stock was $26 per share.
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Question 6
Heidebrecht Design acquired 30% of the outstanding common stock of Quayle Company on January 1, 2014, by paying $779,400 for the 43,300 shares. Quayle declared and paid $0.40 per share cash dividends on March 15, June 15, September 15, and December 15, 2014. Quayle reported net income of $377,700 for the year. At December 31, 2014, the market price of Quayle common stock was $26 per share.
Explanation / Answer
1. Cost method:
1 January 2104
Investment .. Dr $ 779,400
To cash / bank $ 779,400
15 March 2014
Cash / bank ...Dr $ 17,320
To dividend income $ 17320
15 June 2014
Cash / bank ...Dr $ 17,320
To dividend income $ 17320
15 September 2014
Cash / bank ...Dr $ 17,320
To dividend income $ 17320
15 December 2014
Cash / bank ...Dr $ 17,320
To dividend income $ 17320
31 December 2014
Value of investment is
$1,128,800 ($26*43300 shares)
valued at fair value since categorised as available for sale
Unrealised gain = $ 666600
Dividend revenue =$69280
Revenue from stock investment = NA
2.
1 January 2104
Investment .. Dr $ 779,400
To cash / bank $ 779,400
15 March 2014
Cash / bank ...Dr $ 17,320
To investments $ 17320
15 June 2014
Cash / bank ...Dr $ 17,320
To investments $ 17320
15 September 2014
Cash / bank ...Dr $ 17,320
To investments $ 17320
15 December 2014
Cash / bank ...Dr $ 17,320
To investments $ 17320
31 December 2014
Investment .. dr $113310
To gain on investment $113,310
Value of investment is
$779400 - 17320 - 17320 - 17320 - 17320 + 113310
= $823,430
Unrealised gain = $ 44030
Dividend revenue =$69280
Revenue from stock investment = $113310
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