Question

how did they get the solutions for the last three questions please

21. ( Oy On January 1, 2010, X Inc, purchased 12% of the voting shares of Y Inc. for $100.000 investment is reported at cost. X does not have significant influence over Y. Y's net icon and declared dividends for the following three years are as follows: Net Income Dividends 2010 2011 2012 $50,000 $70,000 $30,000 $20,000 $80,000 $60,000 Which of the following journal entries would have to be made to record X's share of Y's dividends paid for 2010? Credit A Cash Debit $2,400 Dividend Income $2,400 $2,400 B. Cash Investment in Y $2,400 $2,400 c Investment in Y Dividend Income $2,400 D. No entry required.

Answer 1

X inc. purchased 12% voting rights of the Y inc. Ownership less than 20% voting rights. So that X inc. uses the 'Cost method' for investments. Under 'Cost method', Any dividend declared by the 'Investee Co.' should be recorded as 'Dividend income' to the extent of percentage holding.

Calculations for dividend income to reported by 'X inc.'.:

Year	Total Dividends Declared by 'Y Inc.'	x	Ownership %	=	Dividend income For 'X Inc.'.
2010	$20,000	x	12%	=	$2,400
2011	$80,000	x	12%	=	$9,600
2012	$60,000	x	12%	=	$7,200

Hence,

For Q 21:

Account title	Debit	Credit
Cash	$2,400
Dividend Income		$2,400

* Dividend income for 2010

For Q 22:

Account title	Debit	Credit
Cash	$9,600
Dividend Income		$9,600

* Dividend income for 2011

For Q 23:

Account title	Debit	Credit
Cash	$7,200
Dividend Income		$7,200

* Dividend income for 2012