Homework Answers
Solution:
| Date | General Journal | Debit | Credit |
| 1/1/2017 | Equity Investment | $ 400,000 | |
| Cash | $ 400,000 | ||
| [To record equity investment made] | |||
| 2017 | Cash | $ 20,000 | |
| Equity Investment | $ 20,000 | ||
| [To record Dividend] | |||
| 2017 | Equity Investment [200000*40%] | $ 80,000 | |
| Equity Income | $ 80,000 | ||
| [To record equity income] | |||
| Date | General Journal | Debit | Credit |
| 2018 | Cash | $ 30,000 | |
| Equity Investment | $ 30,000 | ||
| [To record Dividend] | |||
| 2018 | Equity Investment [300000*40%] | $ 120,000 | |
| Equity Income | $ 120,000 | ||
| [To record equity income] | |||
| Date | General Journal | Debit | Credit |
| 31/12/2018 | Cash | $ 830,000 | |
| Equity Investment [Note:1] | $ 550,000 | ||
| Gain on sale of Investment [ 830000-550000] | $ 280,000 | ||
| [To record sale of investment] |
Notes:
1) Calculation of Investment Value @ 40% shares as on 31/12/2018
| Equity Investment | $ 400,000 |
| Add: Net Income | $ 80,000 |
| Less: Dividend | $ (20,000) |
| Add: Net Income | $ 120,000 |
| Less: Dividend | $ (30,000) |
| Total Value @ 40% shares as on 31/12/2018 | $ 550,000 |
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