Exercise 12-7 On January 1, Zabel Corporation purchased a 25% equity in Helbert

Question

Exercise 12-7

On January 1, Zabel Corporation purchased a 25% equity in Helbert Corporation for $196,000. At December 31, Helbert declared and paid a $64,000 cash dividend and reported net income of $195,000.

Date

Account Titles and Explanation

Debit

Credit

(To record dividends received)

(To record equity in Helbert Corporation's net income)

Exercise 12-7

On January 1, Zabel Corporation purchased a 25% equity in Helbert Corporation for $196,000. At December 31, Helbert declared and paid a $64,000 cash dividend and reported net income of $195,000.

Explanation / Answer

Journal entry :

Determine the amount to be reported as an investment in Helbert stock at December 31.

Date accounts & explanation debit credit Jan 1 Investment in Helbert corporation 196000 Cash 196000 (To record investment) Dec 31 Investment in Helbert corporation (195000*25%) 48750 Investment revenue 48750 (To record net income) Dec 31 Cash (64000*25%) 16000 Investment in Helbert corporation 16000 (To record dividend revenue)

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