Marlow Company acquired 40 percent of the voting shares of Brown Company on January 1, 20X8, for $85,000. The following results are reported for Brown Company:
20X8 20X9 Net income $ 20,000 $ 30,000 Dividends paid 10,000 15,000 Fair value of shares held by Marlow: January 1 85,000 97,000 December 31 97,000 92,000
Required:
a. Give all journal entries recorded by Marlow for 20X8 assuming that it uses the fair value method in accounting for its investment in Brown. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Record the purchase of Brown Company stock.
Record the dividends from Brown Company.
Record the change in value of Brown stock.
b. Give all journal entries recorded by Marlow for 20X9 assuming that it uses the fair value method in accounting for its investment in Brown. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
record the dividends from brown company
record the change in value of brown stock
| Marlow Company acquired 40 percent of the voting shares of Brown Company on January 1, 20X8, for $85,000. The following results are reported for Brown Company: |
| 20X8 | 20X9 | |||||
| Net income | $ | 20,000 | $ | 30,000 | ||
| Dividends paid | 10,000 | 15,000 | ||||
| Fair value of shares held by Marlow: | ||||||
| January 1 | 85,000 | 97,000 | ||||
| December 31 | 97,000 | 92,000 | ||||
| Required: |
| a. | Give all journal entries recorded by Marlow for 20X8 assuming that it uses the fair value method in accounting for its investment in Brown. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) | ||
| Record the purchase of Brown Company stock. Record the dividends from Brown Company. Record the change in value of Brown stock.
|
Related questions
| Promise Enterprises acquired 80 percent of Brown Corporationâs voting common stock on January 1, 20X3, for $376,000. At that date, the fair value of the noncontrolling interest of Brown Corporation was $94,000. Immediately after Promise acquired its ownership, Brown purchased 70 percent of Tann Companyâs stock for $185,500. The fair value of the noncontrolling interest of Tann Company was $79,500 at that date. During 20X3, Promise reported operating income of $270,000 and paid dividends of $90,000. Brown reported operating income of $160,000 and paid dividends of $50,000. Tann reported net income of $60,000 and paid dividends of $10,000. At January 1, 20X3, the stockholdersâ equity sections of the balance sheets of the companies were as follows: |
| Promise Enterprises | Brown Corporation | Tann Company | ||||||||||
| Common Stock | $ | 230,000 | $ | 210,000 | $ | 140,000 | ||||||
| Additional Paid-In Capital | 160,000 | 70,000 | 80,000 | |||||||||
| Retained Earnings | 380,000 | 190,000 | 45,000 | |||||||||
| Total Stockholdersâ Equity | $ | 770,000 | $ | 470,000 | $ | 265,000 | ||||||
| Required: | |
| a. | Prepare the journal entries recorded by Brown for its investment in Tann during 20X3. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) |
| b. | Prepare the journal entries recorded by Promise for its investment in Brown during 20X3. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) |
| c. | Prepare the consolidation entries related to Brownâs investment in Tann and Promiseâs investment in Brown that are needed in preparing consolidated financial statements for Promise and its subsidiaries at December 31, 20X3. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) |
References
eBook & Resources
| Ravine Corporation purchased 30 percent ownership of Valley Industries for $86,400 on January 1, 20X6, when Valley had capital stock of $246,000 and retained earnings of $42,000. The following data were reported by the companies for the years 20X6 through 20X9: |
| Dividends Declared | ||||||||||||
| Year | Operating Income, Ravine Corporation | Net Income, Valley Industries | Ravine | Valley | ||||||||
| 20X6 | $ | 160,000 | $ | 39,000 | $ | 82,000 | $ | 29,000 | ||||
| 20X7 | 85,000 | 59,000 | 82,000 | 49,000 | ||||||||
| 20X8 | 227,000 | 10,000 | 102,000 | 40,000 | ||||||||
| 20X9 | 180,000 | 49,000 | 112,000 | 29,000 | ||||||||
| Required: |
| a. | What net income would Ravine Corporation have reported for each of the years, assuming Ravine accounts for the intercorporate investment using the cost method and the equity method? |
| b-1. | Give all appropriate journal entries for 20X8 that Ravine made under the cost method. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) |
| b-2. | Give all appropriate journal entries for 20X8 that Ravine made under the equity method. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) |
