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Equity Method On January 2, Yorkshire Company acquired 33% of the outstanding stock of Fain Company...

Equity Method

On January 2, Yorkshire Company acquired 33% of the outstanding stock of Fain Company for $330,000. For the year ended December 31, Fain Company earned income of $86,000 and paid dividends of $26,000.

Prepare the entries for Yorkshire Company for the purchase of the stock, the share of Fain income, and the dividends received from Fain Company.

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Answer #1

Ans- Journal Entries

Date Account Title and Explanation Debit ($) Credit ($)
Jan 2 Investment in stock of Fain 330,000
Cash 330,000
(To record the purchase of 33% outstanding stock in Fain Company)
Dec.31 Investment in stock of Fain 28,380
Revenue from investment ($86,000*33%) 28,380
(To record the share of net income in Fain Company)
Dec.31 Cash 8,580
Investment in stock of Fain ($26,000*33%) 8,580
(To record the receipt as cash dividend)

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