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Bolier Company acquired 30% of the stocks of Harris Company for $60 million cash on 1/1/20X1....

Bolier Company acquired 30% of the stocks of Harris Company for $60 million cash on 1/1/20X1. Harris Company reported a net income of $20 million for the period 1/1/20X1 to 12/31/20X1. Harris Company also declared and paid a total cash dividend of $10million to all of its shareholders. For the year 20X1, show the entries that Bolier Company will make related to the above transactions, assuming that it uses the equity method.

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Solution:

Date General Journal Debit Credit
1/1/20X1 Equity Investment $       60,000,000
Cash $    60,000,000
[To record investment in equity]
20X1 Equity Investment [20000000*30%] $         6,000,000
Equity Income $      6,000,000
[To record income earned on equity investment]
20X1 Cash [10000000*30%] $         3,000,000
Equity Investment $      3,000,000
[To record Dividend revenue]
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