Heidi Design acquired 20% of the outstanding common stock of Quigly Company on January 1, 2014, by paying $800,000 for the 30,000 shares. Quigly declared and paid $0.30 per share cash dividends on March 15, June 15, September 15, and December 15, 2014. Quigly reported net income of $320,000 for the year. At December 31, 2014, the market price of Quigly common stock was $34 per share.
Instructions
(b) Prepare the journal entries for Heidi Design for 2014, assuming Heidi Design can exercise significant influence over Quigly. Use equity method.
HINT: Revenue from stock investments $64,000.
Solution
the revenue from dividend is =30,000X0.3= $9000
and 4 times paid, so total dividend= 9000*4= $36,000
and the net income at the date 31,Dec 2014 is $320,000. if you divide it per share, it will be:
total shares are= 150,000 (i.e. when 20% shares are 30,000 in number, total shares are 150,000)
320,000/150,000= $2.133
and total apreciation can be $64,000 (2.133*30,000)
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Heidi Design acquired 20- of the outstanding common stock of Quigly Co (1).docx
1. Heidi Design acquired 20% of the outstanding common stock of Quigly Company on January 1,
2014, by paying $800,000 for the 30,000 shares. Quigly declared and paid $0.30 per share cash
dividends on March 15, June 15, September 15, and December 15, 2014. Quigly reported net
income of $320,000 for the year. At December 31, 2014, the market price of Quigly common
stock was $34 per share.
Instructions
(b) Prepare the journal entries for Heidi Design for 2014, assuming Heidi Design can exercise
significant influence over Quigly. Use equity method.
HINT: Revenue from stock investments $64,000.
Solution
the revenue from dividend is =30,000X0.3= $9000
and 4 times paid, so total dividend= 9000*4= $36,000
and the net income at the date 31,Dec 2014 is $320,000. if you divide it per share, it will be:
total shares are= 150,000 (i.e. when 20% shares are 30,000 in number, total shares are 150,000)
320,000/150,000= $2.133
and total apreciation can be $64,000 (2.133*30,000)
