Rosen Company purchased 35,000 shares of common stock of Corporation as a long-t
ID: 2368488 • Letter: R
Question
Rosen Company purchased 35,000 shares of common stock of Corporation as a long-term investment for $800,000. During the year, Polo Corporation reported net income of $400,000 and paid dividends of $150,000. Instructions (a) Assuming that the 35,000 shares represent a 10% interest in Polo Corporation: 1. Prepare the journal entry to record the investment in Polo stock. 2. Prepare any entries that Rosen Company should make in accounting for its investment in Polo stock during the year. 3. What is the balance of the Stock Investments account on Rosen Company's books at the end of the year? (b) Repeat requirement (a) above except assume that the 35,000 shares represent a 20% interest in Polo Corporation.Explanation / Answer
(a) If less than 20% of the stock is acquired and no significant influence or control exists, the investment is accounted for using the cost method.
Rosen aquired 10 percent (35000 Shares) of common stock of Polo Corp at total cost $800,000
(1)mmd Equity Investments (35,000 shares
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