Agee Corporation acquired a 40% interest in Trent Company on January 1, 2018, for $700,000. At...
Agee Corporation acquired a 40% interest in Trent Company on January 1, 2018, for $700,000.
At that time, Trent had 100,000 shares of its $1 par common stock issued and outstanding. During
2018, Trent paid cash dividends of $240,000. Trent's net income for 2018 was $500,000.
The market price of Trent Company stock on 12/31/18 is $25 per share.
- Record the journal entry for the investment made on Jan 1, 2018?
- Record the journal entry for investment income?
- Record the journal entry for receipt of cash dividends?
d. What is the balance in Agee’s equity investment account at the end of 2018?
Homework Answers
Part - a:
To record entry for investment in equity of T's company is:
Part - b:
To record entry for share of investment income is:
Working note:
Computation the value of share in investment income is:
Value of share in investment income = Value of total income * Percentage of share of income
= $500,000 * 0.40
= $200,000
Hence, the value of share in investment income is $200,000.
Part - c:
To record entry of dividend received for cash is:
Working note:
Computation the value of share in cash dividend is:
Value of share in cash dividend = Value of cash dividend * Percentage of share in dividend
= $240,000 * 0.40
= $96,000
Hence, the value of share in cash dividend is $96,000.
Part - d:
Computation the balance in equity investment account of A's company is:
Balance in equity investment account in A's company = Acquisition value in T's company + Value of share in investment income - Value of share in cash dividend
= $700,000 + $200,000 - $96,000
= $804,000
Hence, the balance in equity investment account of A's company is $804,000.
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Agee Corporation acquired a 40% interest in Trent Company on
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