Motes industries owns 45% of Newton Company. For the current year, Newton report

Question

Motes industries owns 45% of Newton Company. For the current year, Newton reports net income of $250,000 and declares and pays a $60,000 cash dividend. Which of the following correctly presents the journal entries to record Motes’ equity in Newton’s net income and the receipt of dividends from Newton?

a. Dec. 31 Stock Investments.............................. 112,500

Revenue from Stock Investments 112,500

Dec. 31 Cash...................................................... 27,000

Stock Investments.......................... 27,000

b. Dec. 31 Stock Investments............................... 112,500

Revenue from Stock Investments 112,500

Dec. 31 Cash....................................................... 60,000

Stock Investments........................... 60,000

c. Dec. 31 Stock Investments.............................. 85,500

Revenue from Stock Investments 85,500

Dec. 31 Cash....................................................... 27,000

Stock Investments........................... 27,000

d. Dec. 31 Revenue from Stock Investments 112,500

Stock Investments .................................................. 112,500

Dec. 31 Stock Investments............................... 27,000

Cash................................................ 27,000

Explanation / Answer

d. Dec. 31 Revenue from Stock Investments 112,500

Stock Investments.................................................. 112,500

Dec. 31 Stock Investments............................... 27,000

Cash................................................ 27,000

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