Question

Oriole Inc. acquired 20% of the outstanding common stock of Theresa Kulikowski Inc. on December 31, 2020. The purchase price was $1,031,800 for 46,900 shares. Kulikowski Inc. declared and paid an $0.80 per share cash dividend on June 30 and on December 31, 2021. Kulikowski reported net income of $714,000 for 2021. The fair value of Kulikowski's stock was $25 per share at December 31, 2021. Assume that the security is a trading security. Prepare the journal entries for Oriole Inc. for 2020 and 2021, assuming that Oriole cannot exercise significant influence over Kulikowski. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit Date (To record dividend.) (To record fair value.) SHOW LIST OF ACCOUNTS LINK TO TEXT Prepare the journal entries for Oriole Inc. for 2020 and 2021, assuming that Oriole can exercise significant influence over Kulikowski. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit Date (To record dividend.) (To record revenue.) SHOW LIST OF ACCOUNTS LINK TO TEXT At what amount is the investment in securities reported on the balance sheet under each of these methods at December 31, 2021? What is the total net income reported in 2021 under each of these methods? Fair Value Method Equity Method Investment amount (balance sheet) Dividend revenue (income statement) Unrealized holding gain (income statement) Investment income (income statement)

Answer 1

a)cannot exercise
date	accounts	debit	credit
Dec-31	Equity investments	1031800
	cash		1031800
Jun-30	cash	37520
	dividend revenue		37520
	46900*0.8
Dec-31	cash	37520
	dividend revenue		37520
	46900*0.8
	fair value adjustment	140700
	unrealised holding gain		140700
	46900*25-1031800
b)can exercise
date	accounts	debit	credit
Dec-31	Equity investments	1031800
	cash		1031800
Jun-30	cash	37520
	Equity investments		37520
	46900*0.8
Dec-31	cash	37520
	Equity investments		37520
	46900*0.8
	Equity investments	142800
	Revenue from investment		142800
	*46900*25-1031800-
c)		Fair value method	equity method
	Investment amount	1172500	1099560
			1031800-37520-37520+142800
	Dividend revenue	75040
	Investment income (income statement)		142800
	Unrealised holding gain	140700