The following information relates to the long-term investments made during 2010 by Watersong Corporation.
January 2 Bought 40% of the outstanding shares of Foxwood Corp. for $2,200,000 cash.
January 2 Bought 15% of the outstanding shares of Drifter Corp. for $800,000.
July 25 Foxwood declared and paid a $20,000 cash dividend to all stockholders of record.
September 3 Drifter Corp. declared and paid a $30,000 dividend to all stockholders of record.
December 31 Foxwood announced that its 2010 net income was $700,000. Drifter announced its 2010 net income was $75,000.
December 31 The market values of Watersong's shares of Foxwood and Drifter, respectively, were $2,310,000 and $813,000.
Required:
Required:
a. Prepare all necessary journal entries for these transactions or events. If no entry is needed, explain why.
b. What was Watersong's investment in Foxwood at December 31, 2010?
c. Should Watersong and Foxwood consolidate their financial statements? Why or why not?

Question

The following information relates to the long-term investments made during 2010 by Watersong Corporation.
January 2 Bought 40% of the outstanding shares of Foxwood Corp. for $2,200,000 cash.
January 2 Bought 15% of the outstanding shares of Drifter Corp. for $800,000.
July 25 Foxwood declared and paid a $20,000 cash dividend to all stockholders of record.
September 3 Drifter Corp. declared and paid a $30,000 dividend to all stockholders of record.
December 31 Foxwood announced that its 2010 net income was $700,000. Drifter announced its 2010 net income was $75,000.
December 31 The market values of Watersong's shares of Foxwood and Drifter, respectively, were $2,310,000 and $813,000.
Required:
Required:
a.	Prepare all necessary journal entries for these transactions or events. If no entry is needed, explain why.
b.	What was Watersong's investment in Foxwood at December 31, 2010?
c.	Should Watersong and Foxwood consolidate their financial statements? Why or why not?

Quizplus · Accepted Answer

The Answer of The following information relates to the long-term investments made during 2010 by Watersong Corporation.
January 2 Bought 40% of the outstanding shares of Foxwood Corp. for $2,200,000 cash.
January 2 Bought 15% of the outstanding shares of Drifter Corp. for $800,000.
July 25 Foxwood declared and paid a $20,000 cash dividend to all stockholders of record.
September 3 Drifter Corp. declared and paid a $30,000 dividend to all stockholders of record.
December 31 Foxwood announced that its 2010 net income was $700,000. Drifter announced its 2010 net income was $75,000.
December 31 The market values of Watersong's shares of Foxwood and Drifter, respectively, were $2,310,000 and $813,000.
Required:
Required:
a.	Prepare all necessary journal entries for these transactions or events. If no entry is needed, explain why.
b.	What was Watersong's investment in Foxwood at December 31, 2010?
c.	Should Watersong and Foxwood consolidate their financial statements? Why or why not?

The Following Information Relates to the Long-Term Investments Made During