Investments in Common Stock
Both Seco Inc. and Hillsborough Corp. have 100,000 shares of no par common stock outstanding. World Inc. acquired 10,000 shares of Seco stock for $6 per share and 30,000 shares of Hillsborough stock for $12 per share in 2005. Both securities are being held as long term investments. Changes in retained earnings for Seco and Hillsborough for 2007 and 2008 are as follows:
|
|
|
Hillsborough |
|
|
Seco Inc. |
Corp |
|
Retained earnings (deficit), January 1, 2007 |
$175,000 |
$ (45,000) |
|
Cash dividends, 2007 |
(37,500) |
— |
|
|
$137,500 |
$(45,000) |
|
Net income, 2007 |
40,000 |
70,000 |
|
Retained earnings, December 31, 2007 |
$177,500 |
$ 25,000 |
|
Cash dividends, 2008 |
(45,000) |
(20,000) |
|
Net income, 2008 |
70,000 |
40,000 |
|
Retained earnings, December 31, 2008 |
$202,500 |
$ 45,000 |
|
Market value of stock: December 31, 2007 |
$ 750 |
$ 1300 |
|
December 31, 2008 |
650 |
1500 |
Instructions: Give the entries required on the books of World Inc. for 2007 and 2008 to account for its investments.