Purchase Solution

Investment Journal Entries

Not what you're looking for?

Ask Custom Question

Hobson acquires 40% of the outstanding voting stock of Stokes Company on January 1, 2008,for $210,000 in cash. The book value of Stokes' net assets on the date was $400,000, although one company's buildings, with a $60,000 carrying value, was actually worth $100,000. This building had a 10-year remaining life. Stokes owned a royalty agreement with a 20-year remaining life that was undervalued by $85,000.

Stokes sold inventory with an original cost of $60,000 to Hobson during 2008 at a price of $90,000. Hobson still held $15,000(transfer price) of this amount in inventory as of December 31, 2008. These goods are to be sold to outside parties during 2009.

Stokes reported a loss of $60,000 for 2008, $40,000 from continuing operations, and $20,000 from an extraordinary loss. The company still manages to pay a $10,000 cash dividend during the year.

During 2009, Stokes reported a $40,000 net income and distributed a cash dividend of $12,000. It made additional inventory sales of $80,000 to Hobson during the period. The original cost of the merchandise as $50,000. All but 30% if this inventory had been resold to outside partied by the end of the 2009 fiscal year.

Prepare all journal entries for Hobson for 2008 and 2009 in connection with this investment assume that the equity method is applied.

Purchase this Solution

Solution Summary

This solution prepares the investment journal entries for Hobson.

Solution Preview

Dear Student,

Thank you for using BM.
Below are my answers.

Sincerely,
Anna Liza Gaspar

ANSWERS

NOTE: There is no significant influence; hence there is no consolidation of statements. Thus, there will be no adjustments for the upward sale of ...

Purchase this Solution


Free BrainMass Quizzes
Income Streams

In our ever changing world, developing secondary income streams is becoming more important. This quiz provides a brief overview of income sources.

Organizational Behavior (OB)

The organizational behavior (OB) quiz will help you better understand organizational behavior through the lens of managers including workforce diversity.

Understanding the Accounting Equation

These 10 questions help a new student of accounting to understand the basic premise of accounting and how it is applied to the business world.

Change and Resistance within Organizations

This quiz intended to help students understand change and resistance in organizations

Motivation

This tests some key elements of major motivation theories.