Question

On January 1st 2020, Able Company purchased 100 of the 100,000 shares of ABC Company which is traded on the New York Stock Exchange. On January 3rd ABC Company declared and paid a $1.00 per share dividend. In 2020, ABC Company reported a loss of $1000. What journal entry would Able make upon receiving the $100 dividend check?

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a

Debit cash 100 credit dividend revenue 100

b

Debit cash 100 credit investment in ABC 100

c

Debit dividend revenue 100 credit cash 100

d

Debit investment in ABC 100 credit investment in ABC 100

e

None of the above

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Question 1.2

HomeworkUnanswered

Apple Company owns 5% (50 of the 1000 shares) of the stock in Banana Company which it purchased for $5000. Apple has no influence over Banana Company. On January 1st Banana Company has a two for one split. On February 3rd Apple sold 10 of its shares in Banana Company for $300. What gain or loss does Apple show on its sale of Banana Company?

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a

Gain $50

b

Loss $200

c

Loss $4700

d

Gain 300

e

No gain or loss on partial sale

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Question 1.3

HomeworkUnanswered

The Jackson Company purchased 100 shares of Union Company for $1000 in 2020 and correctly accounts for this investment under the fair value method. At the end of 2020 Jackson’s investment in Union stock was worth $980 and on February 4th 2021 Jackson sold all its Union stock for $1040. What gain or loss does Jackson show on the sale of the Union stock?

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a

Gain $40

b

Gain $60

c

Gain $1040

d

Loss $980

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Question 1.4

HomeworkUnanswered

The Alabama Company owns 30% of the Georgia Company and correctly accounts for its investment under the equity method. At the beginning of 2020 Alabama Company showed its investment in Georgia Company as $35,000. During 2020 Georgia Company reported income of $10,000 and paid $6000 in dividends. What is the book value of Georgia Company on Alabama’s books on December 31,2020?

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a

$35000

b

$45000

c

$39000

d

$36200

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Question 1.5

HomeworkUnanswered

On January 2nd 2020 The Florida Company purchased 30% of the Idaho Company for $42,000. At the time of the purchase, all of Idaho’s assets had a book value equal to their market value except for a building with a book value of $100,000 and a fair market value of $130,000. The building has a life of 10 years and no salvage value. During 2020, Idaho reported income of $10,000 and paid no dividends. What is the book value of Florida’s investment in Idaho on December 31st 2020?

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a

$42,000

b

$45,000

c

$39,000

d

$44,100

Answer 1

Debit cash 100 credit dividend revenue 100

When a dividend is declared and recieved, it is an income. Thus, we need to debit cash and credit Dividend revenue. This cause a increase in cash and increase in revenue thus increasing Retained earnings.

Investment in ABC is an asset. It is where the investment purchase amount shows in balance sheet. Thus we cant credit Investment when dividend is recieved.

The loss of the company does not have any effect.