Calculating Revenue Profit & Capital Profit and passing Journal Entry.
Bon Air, Inc., acquired 70 percent (2,800 shares) of the outstanding voting stock of Creedmoor Corporation on January 1, 2004, for $250,000 cash Creedmoor's net assets on that date totaled $230,000, but this balance included three accounts having fair values that differed from their book values:
|
|
Book Value
|
Fair Value
|
|
Land ................................................................................................
|
$30,000
|
$ 40,000
|
|
Equipment (14-year life) ............................................................
|
50,000
|
118,000
|
|
Liabilities (10-year life) ...............................................................
|
(70,000)
|
(50,000)
|
As of December 31, 2007, the two companies report the following balances:
|
|
Bon Air
|
Creedmoor
|
|
Revenues
|
$ (694,800)
|
$(250,000)
|
|
Operating expenses
|
630,000
|
180,000
|
|
Investment income
|
(44,200)
|
-0-
|
|
Net income
|
$ (109,000)
|
$ (70,000)
|
|
Retained earnings, 1/1/07
|
$ (760,000)
|
$(260,000)
|
|
Net income
|
(109,000)
|
(70,000)
|
|
Dividends paid
|
68,000
|
10,000
|
|
Retained earnings, 12/31/07
|
$ (801,000)
|
$(320,000)
|
|
Current assets
|
$ 72,000
|
$ 120,000
|
|
Investment in Creedmoor Corp
|
321,800
|
-0-
|
|
Land
|
241,000
|
50,000
|
|
Buildings (net)
|
289,000
|
200,000
|
|
Equipment (net)
|
165,200
|
40,000
|
|
Total assets
|
$ 1,089,000
|
$ 410,000
|
|
Liabilities
|
$ (180,000)
|
$ (50,000)
|
|
Common stock
|
(50,000)
|
(40,000)
|
|
Additional paid-in capital
|
(58,000)
|
-0-
|
|
Retained earnings, 12/31/07
|
(801,000)
|
(320,000)
|
|
Total liabilities and equities
|
$(1,089,000)
|
$(410,000)
|
If Bon Air sells 400 shares of this stock on December 31, 2007, for $60,000 cash, what journal entry is recorded?