Question

On January 1, 2011, Bear Corporation acquires a 60% interest in Kelly Company and an 80% interest in Samco Company. The purchase prices are $225,000 and $250,000, respectively. The excess of cost over book value for each investment is considered to be goodwill. Immediately prior to the purchases, Kelly Company and Samco Company have the following stockholders’ equities:
a. Kelly Company and Samco Company have the following net incomes for 2011 through 2013 (incomes are earned evenly throughout the year):
b. Kelly Company has the following equity-related transactions for the first three years after it becomes a subsidiary of Bear Corporation:
July 1, 2011 .. Sells 5,000 shares of its own stock at $20 per share. Bear purchases 3,000 of these shares.
December 31, 2012 . Pays a cash dividend of$1per share.
July 1, 2013 ..... Purchases 5,000 shares of NCI-owned stock as treasury shares at $27 per share.
c. Samco Company has the following equity-related transactions for the first three years after it becomes a subsidiary of Bear Corporation:
December 31, 2011 .... Issues a 10% stock dividend. The estimated fair value of Samco common stock is$30 per share on the declaration date.
October1, 2012 ..... Sells 4,000 shares of its own stock at $30 per share. Of these shares, 200 are purchased by Bear.
d. Bear Corporation has $200,000 of additional paid-in capital in excess of par on
December 31, 2013.
Required
Bear Corporation uses the cost method to account for its investments in subsidiaries. Convert its investments to the simple equity method as of December 31, 2013, and provide adequate support for the entries. Assume that the 2013 nominal accounts are closed. Prepare D&D schedules for each investment.


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  • CreatedApril 13, 2015
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