Pugh Company purchased 1,800 shares of the Kramer Group com-mon stock for $ 64,800 Groupcom-monstockfor$64,800 ( i. e., $ 36 Groupcom-monstockfor$64,800(i.e.,$36 per share) at the beginning of the current year. There were 36,000 outstand-ing Kramer shares on the date of acquisition. Pugh Company classifies its investment in Kramer as part of its available- for- sale portfolio. Total stockholders’ equity of Kramer Company is $ 1,080,000 on the date of acquisition. Kramer reported $ 360,000 in net income and declared and paid $ 1.44 per share cash dividends at year- end.
Required
a. Prepare the journal entry to record the purchase of the Kramer shares.
b. Prepare the journal entries necessary to reflect Pugh’s share of Kramer’s dividends.
c. Prepare the journal entry required to adjust Pugh’s available- for- sale investment to its fair value of $ 54 per share at year- end.
d. Prepare the journal entry necessary to record the sale of 900 Kramer shares for $ 63 per share at the beginning of the next year.