MD-2 Determining Financial Statement Effects of Equity Method Securities On Janu

Question

MD-2 Determining Financial Statement Effects of Equity Method Securities On January 2, Ubuy.com paid $160,000 to acquire 25 percent (16,000 shares) of the common stock of E-Net Corporation. The accounting period for both companies ends December 31. July 2 E-Net declared and paid a cash dividend of $5 per share. Dec. 31 E-Net reported net income of $260,000. Required: Indicate the effects (direction and amount) of the transactions listed above. (Enter any decreases to account balances with a minus sign.)

Explanation / Answer

Solution:

Date Balance Sheet Income Statement Assets = Liabilities + Stockholder's Equity Net Income = Revenue - Expenses 2-Jan Investment in E Net Corporation $160,000.00 Cash -$160,000.00 2-Jul Cash $80,000.00 = Investment in E Net Corporation -$80,000.00 31-Dec Investment in E Net Corporation $65,000.00 = $65,000.00 $65,000.00 = Investment income $65,000.00

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