on january 1, 20X3 thunder corporation purchased 35% of the 200,000 outstanding
ID: 2359215 • Letter: O
Question
on january 1, 20X3 thunder corporation purchased 35% of the 200,000 outstanding shares of common stock of rain company for $4.00 per share as a long term investment and obtained significant influence. the purchase price of the shares was equal to their book value. the following information is available about rain company for 20X3 and 20X4: a) cash dividends and paid (total) ; 20X3 - 30,000 20X4- 35,000. b) reported net income; 20X3 80,000 20X4 90,000. c) stock dividend; 20X3- 10% 20X4-..... (1) prepare the necessary journal entries to record the above information assuming thunder uses the equity method to account for this investment. you do not need to record the stock purchase. (2) assume 10,000 shares of the rain company stock is sold on january 4, 20X5 by thunder for $4.25 per share. prepare the journal entry for this sale.Explanation / Answer
cost of shares = 0.35*200000*4 = 2800000 Journal entry debit credit Cash.....................................2800000 Revenue.........................................................2800000 Cash..............................................................65000 divident expense......................65000 2) 10000*4.25 = 42500 Cash.....................................42500 Revenue.........................................................42500
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