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On January 1, 2018 Ivan Corporation purchased $300,000 shares of common stock in JJ, Inc. The...

  1. On January 1, 2018 Ivan Corporation purchased $300,000 shares of common stock in JJ, Inc. The investment is a 40% interest in JJ, Inc. During 2018, JJ Inc., paid total dividends of $20,000 and reported total net income of $800,000. Using the equity method, prepare Ivan’s journal entries to record the following; (a) record the initial investment, (b) record dividends received, and (c) the year-end investment income.
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Answer #1

Journal

Date Account Title Debit Credit
Jan. 1 (a) Stock investments 300,000
Cash 300,000
( To record investment purchase)
Dec. 31 (b) Cash 8,000
Stock investments ( 20,000 x 40%) 8,000
( To record divided received from JJ inc.)
Dec. 31 (c) Stock investments ( 800,000 x 40%) 320,000
Revenue from investment in JJ inc, 320,000
( To record investment income from JJ inc.)

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