Question

Listed below are a few events and transactions of Kodax Company.

Year 1

Jan.		2		Purchased 45,000 shares of Grecco Co. common stock for $451,000 cash. Grecco has 180,000 shares of common stock outstanding, and its activities will be significantly influenced by Kodax.
Sept.		1		Grecco declared and paid a cash dividend of $1.90 per share.
Dec.		31		Grecco announced that net income for the year is $492,900.

Year 2

June		1		Grecco declared and paid a cash dividend of $1.30 per share.
Dec.		31		Grecco announced that net income for the year is $710,400.
Dec.		31		Kodax sold 12,000 shares of Grecco for $171,500 cash.

Prepare journal entries to record the above transactions and events of Kodax Company. (Do not round intermediate calculations and

Answer 1

		Debit	Credit
Jan 2	Long-term investments—Grecco	451000
	Cash		451000
Sep 01	Cash	85500		=45000*1.90
	Long-term investments—Grecco		85500
Dec 31	Long-term investments—Grecco	123225		=492900*25%
	Earnings from long­-term investment		123225
Year 2
June 01	Cash	58500		=45000*1.30
	Long-term investments—Grecco		58500
Dec 31	Long-term investments—Grecco	177600		=710400*25%
	Earnings from long­-term investment		177600
Dec 31	Cash	171500
	Long-term investments—Grecco		162087	=607825/45000*12000
	Gain on sale of investment		9413
	Workings:
	Percentage of ownership	25%		=45000/180000
	Cost of investment	451000
	Add: Share of net income	300825		=123225+177600
	Less: Dividends received	-144000		=85500+58500
	Book value of Investment	607825

Answer 2

whta is the term for long term investment