Packard Inc. is a public company. On January 1, 2020, Packard Inc. purchased 10,000 common shares (15%)

Fantastic news! We've Found the answer you've been seeking!

Question:

Packard Inc. is a public company. On January 1, 2020, Packard Inc. purchased 10,000 common shares (15%) of Saturn Inc. for $115,000 in cash. Saturn had common shares of $225,000 and retained earnings of $475,000 on this date. Packard considered Saturn an FVTPL investment; as it did not give Packard significant influence. On December 31, 2020, the Saturn shares were trading at $13.00 per share.

On January 1, 2021, Packard purchased an additional 25% of Saturn’s shares for $217,000 in cash. This second purchase allowed Packard to exert significant influence over Saturn. The following information was available on the date of acquisition:

Carrying Value Fair Value

Assets not subject to depreciation $205,000 $205,000

Assets subject to depreciation (10 year useful life) 620,000 750,000

Patent (7 year useful life) - 35,000

Liabilities 115,000 115,000

Saturn depreciates assets using the straight-line method and has a 35% tax rate.

During the two years, Saturn reported the following:

Net Income Dividends Declared

2020 $275,000 $75,000

2021 $175,000 $115,000

Additional Information

Saturn pays any dividends declared in cash on January 1 of the subsequent year.
On December 31, 2021, an impairment test revealed that Packard’s share of Saturn’s goodwill was impaired by $10,000.
The 2021 net income included a loss from discontinued operations of $40,000 (net of tax).

REQUIRED:

Prepare all of Packard’s journal entries for 2020 and 2021 related to Packard’s investment in Saturn.