Acker Corporation acquires 30% of the outstanding voting common shares of the Insight Corporation for $600,000 . Packer Corporation acquires the investment in Insight Corporation by buying previously issued shares of Insight Corporation from other investors. Between the time of the acquisition and the end of Packer Corporation's next accounting period, Insight Corporation reports earnings of
$80,000; and pays a dividend of $30,000 to holders of its common stock. Insight Corporation reports earnings of $100,000 and pays dividends of $40,000 during the subsequent accounting period. Assume now that Packer Corporation sells one-fourth of its investment in Insight Corporation for $165,000 . The entry is as follows:
a. Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165,000
Investment in Stock of Insight Corporation. . . . . . . . . . . . . . . . . . . . . 158,250
Gain on Sale of Investment in Stock of Insight Corporation. . . . . . . . . . 6,750
b. Investment in Stock of Insight Corporation. . . . . . . . . . . . . . . 158,250
Gain on Sale of Investment in Stock of Insight Corporation. . . . 6,750
Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . .165,000
c. Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165,000
Investment in Stock of Insight Corporation. . . . . . . . . . . . . . . . . . . . . 158,250
Equity in Earnings of Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,750
d. Investment in Stock of Insight Corporation. . . . . . . . . . . . . . . 158,250
Equity in Earnings of Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . 6,750
Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .165,000
e. Investment in Stock of Insight Corporation. . . . . . . . . . . . . . . 158,250
Gain on Sale of Investment in Stock of Insight Corporation. . . . 6,750
Equity in Earnings of Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165,000
A
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