On January 15, 2014, National Star Inc. purchased 90,000 shares of Krypton Labs
ID: 2454718 • Letter: O
Question
On January 15, 2014, National Star Inc. purchased 90,000 shares of Krypton Labs Inc. directly from one of the founders for a price of $56 per share. Krypton Labs has 250,000 shares outstanding, including the National Star shares. On July 2, 2014, Krypton paid $261,000 in total dividends to its shareholders. On December 31, 2014, Krypton reported a net income of $841,000 for the year. National Star Inc. uses the equity method in accounting for its investment in Krypton Labs.
1.Provide the National Star Inc. journal entries for the transactions involving its investment in Krypton Labs Inc. during 2014.
2.Determine the December 31, 2014, balance of Investment in Krypton Labs Inc. Stock.
Explanation / Answer
% of holding of national in krypton = 90000/250000 = ..36or 36%
2)Balance in investment = 5,040,000 + 302760 -93960 = $ 5,248,800
Date Title Debit credit jan 15 Investment in shares of krypton 5,040,000 cash (90000*56] 5,040,000 [being investment made ] july 2 cash 93960 Investment in krypton (261000*.36) 93960 [being dividend received] dec31 Investment in krypton 302760 share in profit of krypton 302760 [being share of net income recorded](841000*.36)