Capital Co. purchased 100% of Cook Co.’s common stock on January 1, 2014, for $3

Question

Capital Co. purchased 100% of Cook Co.’s common stock on January 1, 2014, for $340,000. On that date, Cook reported net assets with a historical cost of $300,000 and a fair value of $340,000. The difference was due to the increased value of buildings with a remaining life of 10 years. During 2014 and 2015 Cook reported net income of $10,000 and $20,000 and paid dividends of $6,000 and $9,000 respectively. 6.

Give the journal entries that Capital recorded in 2014 related to Cook’s activity

Give the journal entries that Capital recorded in 2015 related to Cook’s activity

Explanation / Answer

Journal Entries in Capital Book Journal Entries Date Account Title Dr $ Cr $ Jan 1.2014. Investment in Cook Co               340,000 Cash           340,000                   2,014 Investment in Cook Co                 10,000 Equity Income - Cook Co              10,000 Depreciation ( Fair value depreciation)                    4,000 Investment in Cook Co                4,000 Cash                    6,000 Investment in Cook Co                6,000                   2,015 Investment in Cook Co                 20,000 Equity Income - Cook Co              20,000 Depreciation ( Fair value depreciation)                    4,000 Investment in Cook Co                4,000 Cash                    9,000 Investment in Cook Co                9,000

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