Homework Answers
journal entry to record the acquisition of short supplies
investment in short supplies debit (80,000*25%) 20,000
to equity income 20,000
(25% share in equity income acquired)
cash account debit (24000*25%) 6000
to investment in short supplies 6000
(since equity income was declared before shares were purchased)
equity income debit (25% of 840,000)-210,000) 0
to investment in short supplies 0
(to record the equity income)
value of investment
initial amount of investment + share of income + sharer of dividend
=210,000 + 6000 + 20,000 = $236000
as the share of investment and dividend income is 25%, 25% of income and dividend is reported.
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