At 1/1/20x1, Tee-Vee Corporation used cash to purchase 10,000 shares of Watch-Me, Inc.'s outstanding voting common...

 

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At 1/1/20x1, Tee-Vee Corporation used cash to purchase 10,000 shares of Watch-Me, Inc.'s outstanding voting common stock for $20 per share. The investment gave Tee-Vee a 15% interest in Watch-Me, Inc. Tee-Vee acquired the stock as a speculative investment, i.e., they do not conduct any other business activities with the investee. At the acquisition date, the fair value of Watch-Me's net assets was $800,000, including a $50,000 unrecorded adjustment to equipment with a remaining useful life of 10 years. Except for the unrecorded equipment adjustment, the book value of Watch-Me's remaining net assets was the same as their related fair values. During the year, Watch-Me, inc. declared and paid dividends of $25,000. Additionally, they generated net income for the year of $300,00o. Watch-Me's common stock is actively traded on a recognized national stock exchange. At 12/31/20Ox1, Watch-Me's common stock traded for $22 per share. Required A. Prepare the journal entry to record Tee-Vee's investment in Watch-Me, inc. at 1/1/20x1. B. Prepare all the journal entries required to record Tee-Vee's investment in Watch-Me for fiscal year-ending 20x1. At 1/1/20x1, Tee-Vee Corporation used cash to purchase 10,000 shares of Watch-Me, Inc.'s outstanding voting common stock for $20 per share. The investment gave Tee-Vee a 15% interest in Watch-Me, Inc. Tee-Vee acquired the stock as a speculative investment, i.e., they do not conduct any other business activities with the investee. At the acquisition date, the fair value of Watch-Me's net assets was $800,000, including a $50,000 unrecorded adjustment to equipment with a remaining useful life of 10 years. Except for the unrecorded equipment adjustment, the book value of Watch-Me's remaining net assets was the same as their related fair values. During the year, Watch-Me, inc. declared and paid dividends of $25,000. Additionally, they generated net income for the year of $300,00o. Watch-Me's common stock is actively traded on a recognized national stock exchange. At 12/31/20Ox1, Watch-Me's common stock traded for $22 per share. Required A. Prepare the journal entry to record Tee-Vee's investment in Watch-Me, inc. at 1/1/20x1. B. Prepare all the journal entries required to record Tee-Vee's investment in Watch-Me for fiscal year-ending 20x1.

Answer rating: 100% (QA)

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