Business, 20.09.2020 19:01, trinityhayes347
Harper, Inc., acquires 40 percent of the outstanding voting stock of Kinman Company on January 1, 2020, for $347,200 in cash. The book value of Kinman's net assets on that date was $680,000, although one of the company's buildings, with a $64,800 carrying amount, was actually worth $117,800. This building had a 10-year remaining life. Kinman owned a royalty agreement with a 20-year remaining life that was undervalued by $135,000. Kinman sold inventory with an original cost of $77,700 to Harper during 2020 at a price of $111,000. Harper still held $24,900 (transfer price) of this amount in inventory as of December 31, 2020. These goods are to be sold to outside parties during 2021. Kinman reported a $45,600 net loss and a $24,200 other comprehensive loss for 2020. The company still manages to declare and pay a $13,000 cash dividend during the year. During 2021, Kinman reported a $49,600 net income and declared and paid a cash dividend of $15,000. It made additional inventory sales of $114,000 to Harper during the period. The original cost of the merchandise was $71,250. All but 30 percent of this inventory had been resold to outside parties by the end of the 2021 fiscal year.
Required:
Prepare all journal entries for Harper for 2019 and 2020 in connection with this investment. Assume that the equity method is applied.
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Harper, Inc., acquires 40 percent of the outstanding voting stock of Kinman Company on January 1, 20...
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