Answer:
Kinman Company 272,000 debit
Royalties Kinman Co 54,000 debit
Building Kinman Co 21,200 debit
Cash 347,200 credit
--to record the purchase--
sales revenue 9,960 debit
account receivables 9,960 credit
inventory 6,972 debit
cost of goods sold 6,972 credit
--to record the unsold part of the inventory in Kinman--
Cash 6,000 debit
Kinman Company 6,000 credit
-- to record dividends--
loss on investment 18,240 debit
retained earnings 9,680 debit
Kinman Company 27,920 credit
--to record net loss of Kinman--
Explanation:
60% of Kinman Company:
680,000 x 40% = 272,000
Excess in Market value of building:
117,800 - 64,800 = 53,000
53,000 x 40% = 21,200
Royalty agreement market value: 135,000
135,000 x 40% = 54,000
Total Value:
272,000 + 21,200 + 54,000 = 347,200
now, we must "unrecord" the unsold part of the inventory of Kinman as it is now considered a intra-entity transaction.
<u><em>Sales Revenue:</em></u>
24,900 x 40% = 9,960
<em><u>Cost of Good Sold:</u></em>
77,700 x 24,900/111,000 x 40% = 6,972
Dividends: they are not considered gain but a distribution of cash from Kinman to us.
15,000 x 40% = 6,000
Losses impact the equity thus, decrease the Kinman Company account
45,600 + 24,200 = 69,800
69,800 x 40% = 27,920
The comprehensive loss will directly decrease retained earnigns rather a loss directly.
45,600 x 40% = 18,240
24,200 x 40% = 9,680
The rest of the transactions occurs in 2021 and we are only asked for 2019/2020
