Bitnec Corporation acquired three separate investments at the beginning of the year. Information about each acquisition, the dividends declared and paid during the year, income, and year-end stock price, follows:
| Bitnec Corporation acquired three separate investments at the beginning of the year. Information about each acquisition, the dividends declared and paid during the year, income, and year-end stock price, follows: | ||
| INITIAL INVESTMENT | ||
| Purchased 50,000 shares of Lynch Corporation at $11 per share. This investment was made with the intent of near-term trading profits. Lynch Corporation has 5,000,000 shares outstanding. | ||
| Purchased 10,000 shares of Graham Corporation at $20 per share. This investment was generally considered to be long-term with no particular plans for near-term trading. Graham Corporation has 2,000,000 shares outstanding. | ||
| Purchased 40% of the shares of Buffet Corporation at $30 per share. This investment was generally considered to be long-term with plans to exert significant influence. Buffet Corporation has 1,500,000 shares outstanding. | ||
| DIVIDENDS | ||
| Lynch Corporation declared and paid dividends of $0.50 per share. | ||
| Graham Corporation declared and paid $2,000,000 in dividends. | ||
| Buffet Corporation declared and paid dividends of $0.25 per share. | ||
| NET INCOME | ||
| Lynch Corporation reported net income of $4,000,000 for the year. | ||
| Graham Corporation reported net income of $7,000,000 for the year. | ||
| Buffet Corporation reported net income of $1,200,000 for the year. | ||
| YEAR END STOCK PRICE | ||
| Lynch Corporation’s closing stock price at the end of the year was $13 per share. | ||
| Graham Corporation’s closing stock price at the end of the year was $15 per share. | ||
| Buffet Corporation’s closing stock price at the end of the year was $33 per share. | ||
| (a) | Prepare journal entries, as necessary, to account for the initial investment, dividend, and year-end stock price for the investment in Lynch Corporation. | |
| (b) | Prepare journal entries, as necessary, to account for the initial investment, dividend and year-end stock price for the investment in Graham Corporation. | |
| (c) | Prepare journal entries, as necessary, to account for the initial investment, dividend and year-end stock price for the investment in Buffet Corporation. | |
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