Question

On January 1, 2010, the Easton Corporation acquired 30% of the outstanding common shares of Feeley Corporation for $140,000, and 25% of the outstanding common shares of Holmes Company for $82,500 and obtained significant influence in both situations. On this date the financial statements of Feeley and Holmes disclosed the following information:


During 2010 Feeley reported a loss of $70,000 and paid dividends of $40,000; Holmes reported income of $45,000 and paid dividends of $28,000. On January 1, 2011, Easton sold all the Holmes shares for $90,000. Assume the company records both investments under the equity method and considers that any difference between each purchase price and the respective book value of the net assets acquired is goodwill.

Required
Prepare journal entries to record
(1) The purchase of the Feeley and Holmes shares,
(2) The recognition of investment income,
(3) The receipt of investee dividends,
(4) The sale of the Holmesshares.


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  • CreatedDecember 09, 2013
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