Brief Exercise 144 On January 1, Sanchez Corporation purchased a 35% equity inte

Question

Brief Exercise 144 On January 1, Sanchez Corporation purchased a 35% equity interest in Lawton Company for $380,000. At December 31, Lawton de dare dividend and reported net income of $98,000. and pai a $40,000 cash Prepare the necessary journal entries for Sanchez Corporation. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit an. 1 Cash 380,000 14000 14000 (To record dividends paid) Dc. 31 (To record reported net income)

Explanation / Answer

Journal entry :

Date account titles and explanation debit credit Jan 1 Investment in Lawton company 380000 Cash 380000 (To record equity investment) Dec 31 Cash (40000*35%) 14000 Investment in Lawton company 14000 (To record dividend paid) Dec 31 Investment in Lawton company (98000*35%) 34300 Income from Lawton company 34300 (To record reported net income)

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