Scroll down to complete all parts of this task. Ember Corp. purchases 20,000 shares (15%) of Stanton
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Ember Corp. purchases 20,000 shares (15%) of Stanton Industries at a price of $31/share and pays legal fees of $35,000 for the acquisition. The investment in Stanton is classified as an available for sale security, as Ember does not exercise significant influence. Stanton shows the following numbers for Year 1:
• | Dividends paid (cash): $430,000 |
• | Retained earnings at Declaration Date: $395,000 |
• | Stock ends the year with a market value of $35 per share |
Ember adjusts the Investment asset account for changes in the fair values of its trading and available for sale securities.
1. The initial (acquisition) journal entry will be:
A | B | C | D | |
---|---|---|---|---|
1 | Debit | Credit | Debit Amount | Credit Amount |
2 | Cash | $430,000 | ||
3 | Dividend Income | $395,000 | ||
4 | Investment in Stanton | $35,000 |
2. The journal entry to record the dividend will be:
A | B | C | D | |
---|---|---|---|---|
1 | Debit | Credit | Debit Amount | Credit Amount |
2 | ||||
3 | ||||
4 |
3. The year-end journal entry will be:
A | B | C | D | |
---|---|---|---|---|
1 | Debit | Credit | Debit Amount | Credit Amount |
2 | ||||
3 | ||||
4 |
4. The gain/loss from the change in value of Stanton stock will go to:
Income Statement |
5. The balance in the “Investment in Stanton” account at the end of Year 1 will be:
Statistics for Business and Economics
ISBN: 978-0321826237
12th edition
Authors: James T. McClave, P. George Benson, Terry T Sincich