Homework Answers
a) Journal Entries - Cost Method
| Date | Account Titles and Explanations | Debit | Credit |
| Jan-01 | Stock Investments | $621,000 | |
| Cash | $621,000 | ||
| Mar-15 | Cash | $24,840 | |
| Dividend Revenue (41,400 * $0.60) | $24,840 | ||
| Jun-15 | Cash | $24,840 | |
| Dividend Revenue (41,400 * $0.60) | $24,840 | ||
| Sep-15 | Cash | $24,840 | |
| Dividend Revenue (41,400 * $0.60) | $24,840 | ||
| Dec-15 | Cash | $24,840 | |
| Dividend Revenue (41,400 * $0.60) | $24,840 | ||
| Dec-31 | Securities Fair Value Adjustments [(41,400 * $26) - $621,000] | $455,400 | |
| Unrealized Gain or Loss Income | $455,400 |
b) Journal Entries - Equity Method
| Date | Account Titles and Explanations | Debit | Credit |
| Jan-01 | Stock Investments | $621,000 | |
| Cash | $621,000 | ||
| Mar-15 | Cash | $24,840 | |
| Stock Investments (41,400 * $0.60) | $24,840 | ||
| Jun-15 | Cash | $24,840 | |
| Stock Investments (41,400 * $0.60) | $24,840 | ||
| Sep-15 | Cash | $24,840 | |
| Stock Investments (41,400 * $0.60) | $24,840 | ||
| Dec-15 | Cash | $24,840 | |
| Stock Investments (41,400 * $0.60) | $24,840 | ||
| Dec-31 | Stock Investments | $71,600 | |
| Revenue from Stock Investments ($358,000 * 20%) | $71,600 |
c) Balance Sheet and Income Statement Account Balances
| Particulars | Stock Method | Equity Method |
| Stock Investments | $621,000 | $593,240 ($621,000 + $71,600 - ($24,840 * 4) |
| Dividend Revenue | $99,360 ($24,840 * 4) |
$0 |
| Unrealized Gain Income | $455,400 | $0 |
| Revenue from Stock Investments | $0 | $71,600 |
Add Answer to:
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