Exercise 17-16 Cheyenne Inc. acquired 20% of the outstanding common stock of The

Question

Exercise 17-16

Cheyenne Inc. acquired 20% of the outstanding common stock of Theresa Kulikowski Inc. on December 31, 2017. The purchase price was $1,310,000 for 52,400 shares. Kulikowski Inc. declared and paid an $0.75 per share cash dividend on June 30 and on December 31, 2018. Kulikowski reported net income of $667,000 for 2018. The fair value of Kulikowski’s stock was $28 per share at December 31, 2018. Assume that the security is a trading security.

I need help with finding the unrealized holding gain (income statement) for Fair Value method and Equity Method. Thanks

"Exercise 17-16 Cheyenne Inc. acquired 20% of the outstanding common stock of Theresa Kulikowski Inc. on December 31, 2017. The purchase price was $1,310,000 for $2,400 shares. Kulikowski inc. declared and paid an $0.75 per share cash dividend on June 30 and on December 31, 2018. Kulikowski reported net income of s667.000 for 2018. The fair value of Kulikowski's stock was $28 per share at December 31, 2018. Assume that the security is a trading security. Your answer is correct. Prepare the foumal entries for Cheyenne Inc. for 2017 and 2018, assuming that Cheyenne cannot exercise significant influence over Kulikowski. (Credit account bieles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts.) Date Account Titles and Explanation Dec. 31, 2017 Equity Investments Debit 1,310,000 Credit h 1,310,000 June 20, 2018 tash Dividend Revenue 6 29 500 52,400 x $0.75 Dec. 31, 2018 tash Dividend Revenue 3 09.200 52,400 x $0.75 (To record dividend.) Fair value Adjustment 157, 200 $28 x 52,400 = 1,467,200 Unrealized Holding Gain or Loss - Income 6 157,200 1,467,200 -1,310,000 = 157,200 (To record fair value.) Your answer is correct. Prepare the journal entries for Cheyenne Inc. for 2017 and 2018, assuming that Cheyenne can exercise significant influence over Kulikowski. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts.) Date Account Titles and Explanation Debit Credit Dec. 31, 2017 Equity Investments 1.310,000 5 tast 1.310,000 June 30, 2018 tash 9,3000 Equity Investments 3 bo za 52,400 x $0.75 Dec. 31, 2018 tash 199, 3000 Equity Investment 0 0,100 52,400 x $0.75 (To record dividend.) Equity Investments 133,400 6 Investment Income 0 133,400 (To record revenue.) 2 Your answer is partially correct. Try again. At what amount is the investment in securities reported on the balance sheet under each of these methods at December 31, 2018? What is the total net income reported in 2018 under each of these methods? SE Investment amount (balance sheet) Dividend revenue (income statement) - Fair Value Method Equity Method A1,467,200 Cs1,364,800 BI78,600 S S A. $28 x 52,400 = $1,467,200 B. $39,300 + $39,300 = $78,600 C. $1,310,000+ $133,400 - $39,300 - $39,300 = $1,364,800 anuan sinema Unrealized holding gain (income statement) Investment income (income statement) 133,400

Explanation / Answer

Fair Value Method Equity Method

Investment (28*52400) 14,67,200    13,10,000

Unrealized Gain=(14,67,200-13,10,000)

=1,57,200

  

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