Question

On January 1, 2020, Culver Corporation purchased 20% of the common shares of Larkspur Company for $159,000. During the year, Larkspur earned net income of $86,000 and paid dividends of $21,500. Prepare the entries for Culver to record the purchase and any additional entries related to this investment in Larkspur Company in 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

On January 1, 2020, Culver Corporation purchased 20% of the common shares of Larkspur Company for $159,000. During the year, Larkspur earned net income of $86,000 and paid dividends of $21,500. Prepare the entries for Culver to record the purchase and any additional entries related to this investment in Larkspur Company in 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Account Titles and Explanation Debit Credit (To record purchase of stock.) (To record receipt of dividends.) (To record revenue.) Click if you would like to Show Work for this question: Open Show Work

Answer 1

Journal

Date	Account title	Debits	Credits
Jan. 1	Equity investments – Larkspur Company	159,000
	Cash		159,000
Dec. 31	Cash	4,300
	Equity investments – Larkspur Company		4,300
Dec. 31	Equity investments – Larkspur Company	17,200
	Revenue from investment in Larkspur Company		17,200

Revenue from investment in Larkspur Company = Net income of Larkspur Company x Percentage of common stock acquired

= 86,000 x 20%

= $17,200

Share of dividend from Larkspur Company = Dividend paid by Larkspur Company x Percentage of common stock acquired

= 21,500 x 20%

= $4,300

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