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Prepare the journal entry by Screws

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Question - On January 1, 2013, Screws purchases Cudd paying $592,000 for an 80% interest. At the time, Cudd's stockholder's equity totaled $715,000, which consisted of common stock (40,000 shares) $100,000, additional paid in capital, $75,000, and retained earnings of $540,000. The acquisition date fair value of the 20% noncontrolling interest was $148,000. On January 1, 2014, Cudd reports retained earnings of $620,000. Screws has accrued the increase in Cudd's retained earnings through the application of the equity method. Both of the below transactions are to be viewed independently.

1. On January 1, 2014, Cudd issues 10,000 additional shares of common stock for $25.00 per share. Screws does not purchase any of the newly issued stock. Prepare the journal entry by Screws to record the effects of the January 1, 2014, stock transaction by Cudd.

2. On January 1, 2014 Cudd reacquires 8,000 shares of its own stock for $24.00 per share. None of these shares belonged to Screws.

Required - Prepare the journal entry by Screws to reflect the effects of the transaction by Cudd.

Reference no: EM132495719

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