Affiliate Marketing Secrets

During 2011, Yale Company acquired some of the 48,100 outstanding shares of the common stock, par $13, of Carol Corporation as available-for-sale investments. The accounting period for both companies ends December 31.
Dec. 2 Purchased 6,300 shares of Carol common stock at $25 per share.
Dec. 15 Carol Corporation declared and paid a cash dividend of $2 per share.
Dec. 31 Determined the current market price of Carol stock to be $21 per share.
Prepare the journal entries for each of the above transactions that occurred during 2011 (Omit the “$” sign in your response):
Date General Journal Debit Credit
Dec. 2 (Click to select)Investments in SASInvestments in Trading securitiesNet unrealized losses/gainsDividend revenueInterest receivableCashAccounts receivableInvestments in affiliates
(Click to select)Accounts payableDividend revenueInvestments in Trading securitiesAccounts receivableCashInvestments in SASInvestments in affiliatesNet unrealized losses/gains
Dec. 15 (Click to select)Investments in affiliatesCashInvestments in SASInterest receivableAccounts receivableInvestments in Trading securitiesNet unrealized losses/gainsDividend revenue
(Click to select)Net unrealized losses/gainsInterest receivableInterest payableInvestments in SASInvestments in affiliatesInvestments in Trading securitiesDividend revenueCash
Dec. 31 (Click to select)Net unrealized losses/gainsCashAccounts receivableDividend revenueAccounts payableInvestments in Trading securitiesInvestments in SASInvestments in affiliates
(Click to select)CashInvestments in affiliatesDividend revenueInterest receivableInvestments in Trading securitiesAccounts receivableInvestments in SASNet unrealized losses/gains

Angela owns all the stock of A, B, and P Corporations. P has owned all the stock of S1 Corporation for six years. The P-S1 affiliated group has filed a consolidated tax return in each of these six years using the calendar year as its tax year. On July 10 of the current year (a nonleap year), Angela sells her entire stock investment in A, which uses the calendar year as its tax year. No change takes place in Angela’s ownership of B stock during the tax year. At the close of business on November 25 of this year, S1 purchases 90% of the common stock and 80% of the nonconvertible, nonvoting preferred stock (measured by value) of S2 Corporation. A, P, S1, and S2 are domestic corporations that do not retain any special filing status. Which corporations are included in the affiliated group? In the controlled group? What income is included in the various tax returns? How is the allocation of the income between tax years made if the books are not closed on the sale or acquisition dates? If no special allocations are made, what portion of the reduced tax rate benefits of Sec. 11(b) can be claimed in the current year by the affiliated group? In future years?

Angela owns all the stock of A, B, and P Corporations. P has owned all the stock of S1 Corporation for six years. The P-S1 affiliated group has filed a consolidated tax return in each of these six years using the calendar year as its tax year. On July 10 of the current year (a nonleap year), Angela sells her entire stock investment in A, which uses the calendar year as its tax year. No change takes place in Angela’s ownership of B stock during the tax year. At the close of business on November 25 of this year, S1 purchases 90% of the common stock and 80% of the nonconvertible, nonvoting preferred stock (measured by value) of S2 Corporation. A, P, S1, and S2 are domestic corporations that do not retain any special filing status.