Packard Inc. is a public company. On January 1, 2020 Packard Inc. purchased 10,000 common shares (15%) of Saturn Inc. for $115,000 in cash. Saturn had common shares of $225,000 and retained earnings of $475,000 on this date. Packard considered Saturn a FVTPL investment; as it did not give Packard significant influence. On December 31, 2020 the Saturn shares were trading at $13.00 per share. On January 1, 2021, Packard purchased an additional 25% of Saturn's shares for $217,000 in cash. This second purchase allowed Packard to exert significant influence over Saturn. The following information was available on the date of acquisition: Carrying Value Fair Value Assets not subject to depreciation $205,000 Assets subject to depreciation (10 year useful life) 750,000 Patent (7 year useful life) 35,000 Liabilities 115,000 115,000 Saturn depreciates assets using the straight-line method and has a 35% tax rate. During the two years, Saturn reported the following: Dividends Declared $275,000 $75,000 $175,000 $115,000 Additional Information Saturn pays any dividends declared in cash on January 1 of the subsequent year. On December 31, 2021, an impairment test revealed that Packard's share of Saturn's goodwill was impaired by $10,000. The 2021 net income included a loss from discontinued operations of $40,000 (net of tax). REQUIRED: Prepare all of Packard's journal entries for 2020 and 2021 related to Packard's investment in Saturn. Net Income 2020 2021 $205,000 620,000
Packard Inc. is a public company. On January 1, 2020 Packard Inc. purchased 10,000 common shares (15%) of Saturn Inc. for $115,000 in cash. Saturn had common shares of $225,000 and retained earnings of $475,000 on this date. Packard considered Saturn a FVTPL investment; as it did not give Packard significant influence. On December 31, 2020 the Saturn shares were trading at $13.00 per share. On January 1, 2021, Packard purchased an additional 25% of Saturn's shares for $217,000 in cash. This second purchase allowed Packard to exert significant influence over Saturn. The following information was available on the date of acquisition: Carrying Value Fair Value Assets not subject to depreciation $205,000 Assets subject to depreciation (10 year useful life) 750,000 Patent (7 year useful life) 35,000 Liabilities 115,000 115,000 Saturn depreciates assets using the straight-line method and has a 35% tax rate. During the two years, Saturn reported the following: Dividends Declared $275,000 $75,000 $175,000 $115,000 Additional Information Saturn pays any dividends declared in cash on January 1 of the subsequent year. On December 31, 2021, an impairment test revealed that Packard's share of Saturn's goodwill was impaired by $10,000. The 2021 net income included a loss from discontinued operations of $40,000 (net of tax). REQUIRED: Prepare all of Packard's journal entries for 2020 and 2021 related to Packard's investment in Saturn. Net Income 2020 2021 $205,000 620,000
Chapter19: Deferred Compensation
Section: Chapter Questions
Problem 52P
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Transcribed Image Text:Packard Inc. is a public company. On January 1, 2020 Packard Inc. purchased
10,000 common shares (15%) of Saturn Inc. for $115,000 in cash. Saturn had
common shares of $225,000 and retained earnings of $475,000 on this date.
Packard considered Saturn a FVTPL investment; as it did not give Packard
significant influence. On December 31, 2020 the Saturn shares were trading at
$13.00 per share.
On January 1, 2021, Packard purchased an additional 25% of Saturn's shares for
$217,000 in cash. This second purchase allowed Packard to exert significant
influence over Saturn. The following information was available on the date of
acquisition:
Carrying Value Fair
Value
Assets not subject to depreciation
$205,000
Assets subject to depreciation (10 year useful life)
750,000
Patent (7 year useful life)
35,000
Liabilities
115,000
115,000
Saturn depreciates assets using the straight-line method and has a 35% tax
rate.
During the two years, Saturn reported the following:
Dividends Declared
$275,000
$75,000
$175,000
$115,000
Additional Information
Saturn pays any dividends declared in cash on January 1 of the subsequent year.
On December 31, 2021, an impairment test revealed that Packard's share of
Saturn's goodwill was impaired by $10,000.
The 2021 net income included a loss from discontinued operations of $40,000
(net of tax).
REQUIRED:
Prepare all of Packard's journal entries for 2020 and 2021 related to Packard's
investment in Saturn.
Net Income
2020
2021
$205,000
620,000
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