Question

Hello my question is in the answer of part 1. QUESTION IS WHERE DOES THE 4000 AND 10,000 COME FROM ?

2) 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:

                                          2013                 2014 

Net income                   $60,000           $140,000

Dividends                     $20,000             $40,000

Required:

1.   Prepare journal entries for Pike Corporation to account for its investment in Salmon Corporation for 2013 and 2014.

Pike Corporation – Journal Entries for 2013

1/1/2013          Investment in Salmon                                                            100,000

                                    Cash                                                                                        100,000

12/31/2013      Cash                                                                                            2,000

                                    Dividend Income                                                                        2,000

Pike Corporation – Journal Entries for 2014

12/31/2014      Cash                                                                                           4,000

                                    Dividend Income                                                                        4,000

12/31/2014      Investment in Salmon                                                            192,000

                                    Cash                                                                                        192,000

12/31/2014      Investment in Salmon                                                            14,000

                                    Retained Earnings                                                                   14,000

Cost to Equity Basis Adjustment:

Beginning Retained Earnings 1/1/2013                                                                     $200,000

Add: Net Income 2013                                                                                                  60,000

Less: Dividends 2013                                                                                                                 20,000

Ending Retained Earnings 12/31/2013                                                                      $240,000

Beginning Retained Earnings 1/1/2014                                                                     $240,000

Add: Net Income 2014                                                                                                 140,000

Less: Dividends 2014                                                                                                                 40,000

Ending Retained Earnings 12/31/2013                                                                      $340,000

10% of Change in Retained Earnings Since 1/1/2013 ($4,000*10%+$10,000*10%)             $   14,000

QUESTION IS WHERE DOES THE 4000 AND 10,000 COME FROM ?

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