Question

Grouper Inc. acquired 20% of the outstanding common stock of Theresa Kulikowski Inc. on December 31, 2020. The purchase price was $1,310,000 for 52,400 shares. Kulikowski Inc. declared and paid an $0.85 per share cash dividend on June 30 and on December 31, 2021. Kulikowski reported net income of $701,000 for 2021. The fair value of Kulikowski's stock was $28 per share at December 31, 2021. Assume that the security is a trading security. Prepare the journal entries for Grouper Inc. for 2020 and 2021, assuming that Grouper 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 O for the amounts.) Date Account Titles and Explanation Debit Credit (To record dividend.) (To record fair value.) e Textbook and Media List of Accounts

Answer 1

Solution Part A - fair value (when so significant influence] Account title and explanation Debit(a) credit () Date Dec-31 2020 equity 13.10.000 investment cash 13.10.000 June -30 2021 44,540 cash ( 52.400X0.85] Dividend revenue 44,540 | Կկ, Տն) December +31 2021 cash . Dividend income uu.suo 1.57,200 1,571200 Fair value adjustment unrealized holding gain [(88-95) X52,400) {To record fair valio ad Justment)

with significant Part-B't eavity method influence. pate at der 2020 Account title and explanation equity investment - cash Debit (8) credit(a) 13,10,000 13.10.000 44,500 30-Juno 2020 cash [52,400 x0.85] Equity investment uu.540 I 31-Dec 2021 44.540 cash (52,4008085] 44.540 Equity investment Equity investment 1.40.200 Revenue from investment ($ 7,01.000x207.3 1,40.200 Equity method $13,61,200 -Parto-c- Particolars fairvalue gnvestment [Balace Sheet] $14.67,200 (13,10,000 +1.571200] Dividend revenue $89.080 (4u.suot 44,540) unrealized holding gain $1,57,200 revenue from investment $1,40,200

Note: I computation of eauity method investment = 13.10.000 - 44,540 - 44,540+1,40,206 - $13,61,120 R
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