Answered Essay: dle Corporation has been acquiring shares of Fast Track Enterpri

Idle Corporation has been acquiring shares of Fast Track Enterprises at book value for the last several years. Fast Track provided data including the following:


20X2 20X3 20X4 20X5
  Net Income $ 41,000 $ 56,000 $ 41,000 $ 51,000
  Dividends 21,000 21,000 11,000 21,000


Fast Track declares and pays its annual dividend on November 15 each year. Its net book value on January 1, 20X2, was $253,000. Idle purchased shares of Fast Track on three occasions:
Date Percent of Ownership
Amount Paid
  January 1, 20X2 10 % $ 25,300
  July 1, 20X3 5 17,710
  January 1, 20X5 14 70,840
Prepare the journal entries to be recorded on Idle’s books in 20X5 related to its investment in Fast Track. (If no entry is required for a transaction/event, select “No journal entry required” in the first account field.)
Record purchase of Fast Track stock.
Record the pick-up of the difference between cost and equity income.
Record dividend from Fast Track Enterprises.
Record equity-method income.

Expert Answer


Journal entries to be recorded on Idle’s books in 20X5 related to its investment in Fast Track is as shown below:

Date Particulars L.F Amount ($) Amount ($)
1 Investment in Fast Track Enterprises Stock 70,840
Cash 70,840
(For purchase of Idle enterprises stock recorded)
2 Investment in Fast Track Enterprises Stock 10,350
Retained earnings 10,350
(For pick up difference between cost and equity income)
2012 = (41,000-21,000) = 20,000*10% = 2,000
2013 = (56,000/2)*10% + (56,000/2 – 21,000)*15% = 3,850
2014 = (41,000-11,000)*15% = 4,500
Amount of increase = 10,350
3 Cash 6,090
   Investment in Fast Track Enterprises Stock 6,090
(for dividend received in Idle Corp shares)
4 Investment in Fast Track Enterprises Stock 14,790
Income from Fast track 14,790
(For equity method income recorded 51,000*.29)
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