on january 1 20X3 show corporation purchased 30% of the 200,000 outstanding shar

Question

on january 1 20X3 show corporation purchased 30% of the 200,000 outstanding shares at common stock storm company for $4.00 par share as a long-term investment. the purchase price of the shares was equal to their book value. the following information is available about storm company for 20X3 and 20X4: (a) cash dividends declared and paid (total) (B) reported net income (C) stock dividend. 1) prepare the necessary journal entries to record the above information assuming snow uses the cost method to account for this investment. you do not need to record the stock purchases. 2) assume 10,000 shares of the storm company stock is sold on january 4, 20X5 by snow for $4.25 per share. prepare the journal entry for this sale.

Explanation / Answer

cost of shares = 0.30*200000*4 = 240000 Journal entry debit credit Cash.....................................240000 Revenue.........................................................240000 2) 10000*4.25 = 42500 Cash.....................................42500 Revenue.........................................................42500

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