On December 31, a business has a long-term investment that qualifies an equity s
ID: 2532755 • Letter: O
Question
On December 31, a business has a long-term investment that qualifies an equity security with significant influence. The business owns 25% of the voting stock of the investee.
On December 31, assume the investee reports a net income of $100,000 for the year. Prepare any necessary journal entries on the books of the investor on December 31.
On December 31, assume the investee reports a net loss of $50,000 for the year. Prepare any necessary journal entries on the books of the investor on December 31.
On December 31, assume the investee pays a $2,000 cash dividend to the investor. Prepare any necessary journal entries on the books of the investor on December 31.
Explanation / Answer
Journal Entries Account titles & Explanations Debit Credit 1) investment 25000 investment income 25,000 (100000*25%) 2) investment loss 12500 investment . 12,500 (50000*25%) 3) cash 2000 investment 2000
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