1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Karo-lina-s [1.5K]
2 years ago
9

Harper, Inc., acquires 40 percent of the outstanding voting stock of Kinman Company on January 1, 2020, for $347,200 in cash. Th

e book value of Kinman's net assets on that date was $680,000, although one of the company's buildings, with a $64,800 carrying amount, was actually worth $117,800. This building had a 10-year remaining life. Kinman owned a royalty agreement with a 20-year remaining life that was undervalued by $135,000. Kinman sold inventory with an original cost of $77,700 to Harper during 2020 at a price of $111,000. Harper still held $24,900 (transfer price) of this amount in inventory as of December 31, 2020. These goods are to be sold to outside parties during 2021. Kinman reported a $45,600 net loss and a $24,200 other comprehensive loss for 2020. The company still manages to declare and pay a $13,000 cash dividend during the year. During 2021, Kinman reported a $49,600 net income and declared and paid a cash dividend of $15,000. It made additional inventory sales of $114,000 to Harper during the period. The original cost of the merchandise was $71,250. All but 30 percent of this inventory had been resold to outside parties by the end of the 2021 fiscal year.
Required:
Prepare all journal entries for Harper for 2019 and 2020 in connection with this investment. Assume that the equity method is applied.
Business
1 answer:
Goshia [24]2 years ago
4 0

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

You might be interested in
According to the preprinted language what type of deed is to be used at closing to convey the title to the real property that is
GenaCL600 [577]
The type of deed that is used is called GENERAL WARRANTY.
General warranty is used to transfer property title to a buyer; it contains full warranty of title whereby the seller assures the buyer that the property is free and clear of any other claim.
3 0
3 years ago
In building a marketing presence on F a c e b o o k, you find that you have to spend a lot of time copying content from your T w
Basile [38]

Answer:I think delegating the task to your employees is the answer

3 0
3 years ago
The Republic of Gizmovia wants to maintain the exchange rate of its currency, the gizmo, at $0.50, but the current exchange rate
lukranit [14]

Answer:

D) increase; decrease

Explanation:

in order to appreciate the currency by $0.10, the interest rates need to be increased. This will encourage people to save more and thus increase the demand for gizmo that will increase the exchange rate.

This increased interest rate will also decrease the capital outflow out of the country as more people will be willing to take advantage of higher interest on savings in the country than investing outside of the country to leverage opportunities. Thus option D is the right choice.

Hope that helps.

8 0
3 years ago
Nathan would like to become a doctor but needs help financing his education. Which option could allow Nathan to achieve his goal
scZoUnD [109]
A enlist in the military. If you enlist in the US military they will cover the costs of your education
4 0
2 years ago
Read 2 more answers
Strategic mgmt the two best reasons for investing company resources in vertical integration (either forward or backward are to
LenKa [72]
<span>add materially to a company's technological capabilities, strengthen the company's competitive position, and/or boost its profitability.</span>
6 0
3 years ago
Other questions:
  • Read the scenario.
    9·2 answers
  • Mr. and Mrs. Anderson own three shares of Magic Tricks Corporation's common stock. The market value of the stock is $60. The And
    12·1 answer
  • American-based Trenton Inc. has decided to establish a wholly owned subsidiary in Argentina. To decide whether to acquire an ent
    13·1 answer
  • Approximately what percentage of jobs in the United States require some type of post-secondary education?
    6·1 answer
  • You are working with your project team to schedule activities for your construction project. You have the carpet installation ac
    15·1 answer
  • The Abrams, Bartle, and Creighton partnership began the process of liquidation with the following balance sheet: Picture Abrams,
    9·1 answer
  • Which of the following is not a characteristic of an organizational objective?
    11·1 answer
  • Giving consumers product brochures to take home with them helps with ________, since many of them will not remember the details
    12·1 answer
  • Please help economics
    13·2 answers
  • Which dimensions should a marketer consider when dealing with the human aspect of distribution channels?
    10·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!