On January 4, Year 1, Larsen Corp purchased 10,000 shares of
Warner Corp for $119,000 plus...
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On January 4, Year 1, Larsen Corp purchased 10,000 shares ofWarner Corp for $119,000 plus a broker’s fee of $2,000. Warner Corphas 50,000 common shares outstanding and it is presumed the LarsenCorp will have a significant influence over Warner Corp. DuringYear 1 and Year 2, Warner Corp declared and paid cash dividends of$0.85 per share. Warner Corp‘s net income was $72,000 and $67,000for Year 1 and year 2, respectively. The January 12, Year 3 entryto record the sale of 5,000 shares of Warner Corp for $65,000should be?
Please show the answer in details.
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3.7 Ratings (485 Votes)
% of shares taken=(10000/50000)
0.2
Purchase Price incuding brokerage=($119000+$2000)
$
1,21,000.00
Less: Dividend received
Year 1=(10000*.85)
$ -8,500.00
Year 2=(10000*$.85)
$ -8,500.00
Add: Net Income
Year 1=($72000*.20)
$ 14,400.00
Year 2=($67000*.20)
$ 13,400.00
Book Value of Investment
$
1,31,800.00
Book
Value of 5000 shares=($131800)*(5000/10000)
$ 65,900.00
Less: Sales Price
$ -65,000.00
Loss on Sale
$
900.00
General,Journal
Debit
Credit
Cash
$ 65,000.00
Loss on Sale of Investment
$
900.00
To Long Term Investment
$
65,900.00
(Being
amount of sale of 5000 shares at a loss)
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