On January 10, 2011, Delta Corporation acquired 12,000 shares of the outstanding common stock of Kennedy Company

Question:

On January 10, 2011, Delta Corporation acquired 12,000 shares of the outstanding common stock of Kennedy Company for $600,000. At the time of purchase, Kennedy Company had outstanding 48,000 shares with a book value of $2.4 million. On December 31, 2011, the following events took place:

(a) Kennedy reported net income of $160,000 for the calendar year 2011.

(b) Delta received from Kennedy a dividend of $0.55 per share of common stock.

Give the entries that would be required to reflect the purchase and subsequent events on the books of Delta Corporation, assuming that

(1) The security is classified as available for sale and

(2) The equity method is appropriate.

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...