Pike Corporation paid $100,000 for a 10% interest in Salmon Corp. on January 1, 2013, when Salmon's stockholders' equity consisted of $800,000 of $10 par value common stock and $200,000 retained earnings. On December 31, 2014, after receipt of the year's dividends from Salmon, Pike paid $192,000 for an additional 20% interest in Salmon Corp. Both of Pike's investments were made when Salmon's book values equaled their fair values. Salmon's net income and dividends for 2013 and 2014 were as follows:
Required:
1. Prepare journal entries for Pike Corporation to account for its investment in Salmon Corporation for 2013 and 2014.
2. Calculate the balance of Pike's investment in Salmon at December 31, 2014.

Question

Pike Corporation paid $100,000 for a 10% interest in Salmon Corp. on January 1, 2013, when Salmon's stockholders' equity consisted of $800,000 of $10 par value common stock and $200,000 retained earnings. On December 31, 2014, after receipt of the year's dividends from Salmon, Pike paid $192,000 for an additional 20% interest in Salmon Corp. Both of Pike's investments were made when Salmon's book values equaled their fair values. Salmon's net income and dividends for 2013 and 2014 were as follows:
  Required:
1. Prepare journal entries for Pike Corporation to account for its investment in Salmon Corporation for 2013 and 2014.
2. Calculate the balance of Pike's investment in Salmon at December 31, 2014.

Quizplus · Accepted Answer

The Answer of Pike Corporation paid $100,000 for a 10% interest in Salmon Corp. on January 1, 2013, when Salmon's stockholders' equity consisted of $800,000 of $10 par value common stock and $200,000 retained earnings. On December 31, 2014, after receipt of the year's dividends from Salmon, Pike paid $192,000 for an additional 20% interest in Salmon Corp. Both of Pike's investments were made when Salmon's book values equaled their fair values. Salmon's net income and dividends for 2013 and 2014 were as follows:
  Required:
1. Prepare journal entries for Pike Corporation to account for its investment in Salmon Corporation for 2013 and 2014.
2. Calculate the balance of Pike's investment in Salmon at December 31, 2014.

Pike Corporation Paid $100,000 for a 10% Interest in Salmon