Question

2020 Final Version B.docx Insert Layout References Review View Help Open in Desktop App Tell me what you want to do Editing Palatino Linoty... 11 А А" B T U ON A A E Edir Page Break Question 2 (25 marks) Unit 8 - Investments The Trendy Clothing Corporation reported the following transactions for the year 2019: Jan. 1Purchased 35% of the common shares of Cool Hoodies Corporation for $550,000 This is a long-term investment giving Trendy Clothing significant influence over the operations of Cool Hoodies. Sept. 30Received a $34.000 dividend on the Cool Hoodies Corporation stock. Dec. 31Cool Hoodies Corporation reported net income of $167,500 for the year ended December 31, 2019. Dec. 31Trendy Clothing sold 50% of the Cool Hoodies shares for $300,000. Prepare journal entries to record all the above events for the Trendy Clothing Corporation. Credit Debit 550000 Jan 1 Common shear To Bank 550000 34000 Sept 30 1009 34000 cash To hoodeis coperation ds English (US)

Answer 1

Date Account Ref. Debit Credit $ 550,000 Jan-01 Investment in Cool hoodies Cash / Bank (Purchased Investment) $ 550,000 $ 34,000 Sep-30 Cash / Bank Dividend Income (Received dividend income) $ 34,000 Dec-31 No journal entry $ 300,000 Dec-31 Cash / Bank Investment In Cool hoodies Gain on sale of asset (Sold a part of investment) $ 275,000 $ 25,000

Net income reported by investment company will not have any effect on our books.