At a total cost of $716,800, Abbott Corporation acquired 64,000 shares of Costel

Question

At a total cost of $716,800, Abbott Corporation acquired 64,000 shares of Costello Corp. common stock as a long-term investment. Abbott Corporation uses the equity method of accounting for this investment. Costello Corp. has 200,000 shares of common stock outstanding, including the shares acquired by Abbott Corporation. Journalize the entries by Abbott Corporation to record the following information: a. Costello Corporation reports net income of $1,290,000 for the current period. b. A cash dividend of $1.90 per common share is paid by Costello Corporation during the current period.

Explanation / Answer

for costello corp EPS = 1290000/200000 = 6.45 total dividends paid = 1.9*200000 = 380000 journal entry debit credit cash.................................................................380,000 Dividends expense......................380,000

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