Exam 1 ACNT 2333-6426

Exam 1 ACNT 2333-6426 - Natosha Tilmorn ACNT 2333-6426...

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Unformatted text preview: Natosha Tilmorn ACNT 2333-6426 February 27, 2011 1.On January 1, 2011, Spark Corp. acquired a 40% interest in Cranston Inc. for $250,000. On that date, Cranston's balance sheet disclosed net assets of $430,000. During 2011, Cranston reported net income of $100,000 and paid cash dividends of $30,000. Spark sold inventory costing $40,000 to Cranston during 2011 for $50,000. Cranston used all of this merchandise in its operations during 2011. Any excess cost over fair value is attributable to an unamortized trademark with a 20 year remaining life. Required: Prepare all of Spark's journal entries for 2011 to apply the equity method to this investment. a) Investment in Cranston 250,000 Cash 250,000 To record interest in Cranston b) Cash 12,000 Investment in Cranston 12,000 To record receipt of cash dividend 30,000 X .40=12,000 c) Investment in Cranston 40,000 Equity in Cranston 40,000 To accrue earnings of 40% interest in Cranston, Inc. 100,000 X .40=40,000 d) Equity in Cranston 3,900 Investment in Cranston 3,900 To record amortization of trademark 430,000 X .40=172,000 250,000-172,000=78,000/20=3,900(amortization of trademark) Natosha Tilmorn ACNT 2333-6426 February 27, 2011 2. On January 2, 2010, Hull Corp. paid $516,000 for 24% (48,000 shares) of the outstanding common stock of Oliver Co. Hull used the equity method to account for the investment. At the end of 2010, the balance in the investment account was $620,000. On January 2, 2011, Hull sold 12,000 shares of Oliver stock for $12 per share. For 2011, Oliver reported income of $118,000 and paid dividends of $30,000. Required:...
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This note was uploaded on 02/27/2011 for the course ACCT 2332 taught by Professor Tzsdfda during the Spring '11 term at Dallas Christian.

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Exam 1 ACNT 2333-6426 - Natosha Tilmorn ACNT 2333-6426...

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