Question

# Company A buys 25% of Company B on October 1, 2019 Payment \$           25,000 Company B...

 Company A buys 25% of Company B on October 1, 2019 Payment \$           25,000 Company B Net Income for Q4 2019 5,000 Company B Net Loss for Q1 2020 (8,000) Dividends received by Company A in Q1 2020 2,000 Record the journal entries on: October 1, 2016: December 31, 2016: March 31, 2017: What's the carrying amount of the investment on Company B on March 31, 2017?

Solution :

 Journal Entries - Company A Date Particulars Debit Credit 1-Oct-19 Investment in company B Dr \$25,000.00 To Cash \$25,000.00 (To record purchase of investment) 31-Dec-19 Investment in company B Dr \$1,250.00 To Investment Income (\$5,000*25%) \$1,250.00 (To record share of income in Company B) 31-Mar-20 Loss on investment Dr (\$8,000*25%) \$2,000.00 To Investment in company B Dr \$2,000.00 (To record share of Loss in Company B) 31-Mar-20 Cash Dr \$2,000.00 To Investment in company B Dr \$2,000.00 (To record dividend received from Company B)

Carrying amount of the investment on Company B on March 31, 2017 = \$25,000 + \$1,250 - \$2,000 - \$2,000 = \$22,250

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