Question

Question 1 (25 marks) Unit 8 - Investments Mohammad Nurul islam The Trendy Clothing Corporation reported the following transactions for the year 2019: Jan. 1Purchased 35% of the common shares of Cool Hoodies Corporation for $700,000 This is a long term investment giving Trendy Clothing significant influence over the operations of Cool Hoodies Sept. 30Received a $412,000 dividend on the Cool Hoodies Corporation stock Dec 31Cool Hoodies Corporation reported net income of $176.200 for the year ended December 31, 2019 Dec. 31Trendy Clothing sold 50% of the Cool Hoodies shares for $400,000 Prepare journal entries to record all the above events for the Trendy Clothing Corporation Debit Credit Jan 1 Los

Answer 1

Date Account Ref. Debit Credit $ 700,000 Jan-01 Investment in Cool hoodies Cash (Purchased Investment) $ 700,000 $ $ 42,000 Sep-30 Cash Dividend Income (Received dividend income) $ 42,000 Dec-31 No journal entry $ 400,000 Dec-31 Cash Investment In Cool hoodies Gain on sale of asset (Sold a part of investment) $ 350,000 $ 50,000

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