Question

Miller Corporation acquired 30% of the outstanding common stock of Crowell Corporation for $160,000 on January 1, 2018, and obtained significant influence. The purchase price of the shares was equal to their book value. During 2018, the following information is available for Crowell:

Mar. 31	Declared and paid a cash dividend of $60,000.
June 30	Reported semiannual earnings of $110,000 for the first half of 2018.
Sept. 30	Declared and paid a cash dividend of $60,000.
Dec. 31	Reported semiannual earnings of $140,000 for the second half of 2018.

Required:

1.	Prepare journal entries for Miller to reflect the preceding information.
2.	What is the balance in Miller’s investment account on December 31, 2018?

CHART OF ACCOUNTS
Miller Corporation
General Ledger
ASSETS 111 Cash 121 Accounts Receivable 141 Inventory 152 Prepaid Insurance 181 Equipment 189 Accumulated Depreciation 192 Investment in Stock LIABILITIES 211 Accounts Payable 231 Salaries Payable 250 Unearned Revenue 261 Income Taxes Payable EQUITY 311 Common Stock 331 Retained Earnings	REVENUE 411 Sales Revenue 423 Investment Income 431 Interest Income EXPENSES 500 Cost of Goods Sold 511 Insurance Expense 512 Utilities Expense 521 Salaries Expense 532 Bad Debt Expense 540 Interest Expense 541 Depreciation Expense 559 Miscellaneous Expenses 910 Income Tax Expense

Prepare journal entries for Miller to reflect the 2018 transactions. Additional Instruction

PAGE 1

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3
4
5
6
7
8
9
10

What is the balance in Miller’s investment account on December 31, 2018?

Answer 1

Answer

Date	Accounting titles & explanations	Debit	Credit
1-Jan	Investment	$160,000
	cash		$160,000
31-Mar	cash (60000 X 30%)	$18,000
	investment		$18,000
30-Jun	investment	33000
	investment income (110,000*30%)		33,000
30-Sep	cash (60000 X 30%)	18,000
	investment		18,000
31-Dec	investment	42,000
	investment income (140,000*30%)		42,000
2.	Balance in investment account
	Investment		160,000
	less cash dividend		(36,000)
	add investment income		75,000
	Balance in investment account		$199,000