Larkspur Inc. acquired 20% of the outstanding common stock of Theresa Kulikowski
ID: 2554746 • Letter: L
Question
Larkspur Inc. acquired 20% of the outstanding common stock of Theresa Kulikowski Inc. on December 31, 2017. The purchase price was $1,214,400 for 52,800 shares. Kulikowski Inc. declared and paid an $0.80 per share cash dividend on June 30 and on December 31, 2018. Kulikowski reported net income of $768,000 for 2018. The fair value of Kulikowski’s stock was $26 per share at December 31, 2018. Assume that the security is a trading security. Collapse question part (a) Prepare the journal entries for Larkspur Inc. for 2017 and 2018, assuming that Larkspur cannot exercise significant influence over Kulikowski.
Explanation / Answer
SOLUTION
*Unrealized Holding Gain or Loss - Equity-
Date Account titles and Explanation Debit ($) Credit ($) Dec.31,2017 Equity Investments (Available-for-Sale) 1,214,400 Cash 1,214,400 June 30,2018 Cash (52,800 shares * $0.80) 42,240 Dividend Revenue 42,240 Dec. 31, 2018 Cash (52,800 shares * $0.80) 42,240 Dividend Revenue 42,240 Fair Value Adjustment (Available-for-Sale) 158,400 Unrealized Holding Gain or Loss - Equity* 158,400Related Questions
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