Question

On January 2, Cohan Company acquired 37% of the outstanding stock of Sanger Company for $715,500. For the year ended December 31, Sanger Company earned income of $108,700 and paid dividends of $26,400.

Prepare the entries for Cohan Company for the purchase of the stock, the share of Sanger income, and the dividends received from Sanger Company. Refer to the Chart of Accounts for exact wording of account titles.

On January 2, Cohan Company acquired 37% of the outstanding stock of Sanger Company for $715,500. For the year ended December 31, Sanger Company earned income of $108,700 and paid dividends of $26,400.

Prepare the entries for Cohan Company for the purchase of the stock, the share of Sanger income, and the dividends received from Sanger Company. Refer to the Chart of Accounts for exact wording of account titles.

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Chart of Accounts

CHART OF ACCOUNTS

Cohan Company

General Ledger

	ASSETS
110	Cash
111	Petty Cash
120	Accounts Receivable
121	Allowance for Doubtful Accounts
131	Notes Receivable
132	Interest Receivable
141	Merchandise Inventory
145	Office Supplies
161	Investment in Sanger Company Stock
165	Valuation Allowance for Trading Investments
166	Valuation Allowance for Available-for-Sale Investments
181	Land
193	Office Equipment
194	Accumulated Depreciation-Office Equipment

	LIABILITIES
210	Accounts Payable
221	Notes Payable
231	Interest Payable
241	Salaries Payable

	EQUITY
311	Common Stock
312	Paid-In Capital in Excess of Par-Common Stock
321	Preferred Stock
322	Paid-In Capital in Excess of Par-Preferred Stock
331	Treasury Stock
332	Paid-In Capital from Sale of Treasury Stock
340	Retained Earnings
350	Unrealized Gain (Loss) on Available-for-Sale Investments
351	Cash Dividends
352	Stock Dividends
390	Income Summary

	REVENUE
410	Sales
611	Interest Revenue
612	Dividend Revenue
621	Income of Sanger Company
631	Gain on Sale of Investments
641	Unrealized Gain on Trading Investments

	EXPENSES
511	Cost of Merchandise Sold
512	Bad Debt Expense
516	Cash Short and Over
520	Salaries Expense
531	Advertising Expense
534	Selling Expenses
535	Rent Expense
537	Office Supplies Expense
562	Depreciation Expense-Office Equipment
590	Miscellaneous Expense
710	Interest Expense
721	Loss of Sanger Company
731	Loss on Sale of Investments
741	Unrealized Loss on Trading Investments

Answer 1

Solution:

Journal Entries -Cohan Company
Event	Date	Particulars	Debit	Credit
1	2-Jan	Investment in Sanger Company Stock Dr	$715,500.00
		To Cash		$715,500.00
		(To record equity investment)
2	31-Dec	Investment in Sanger Company Stock Dr	$40,219.00
		To Income of Sanger Company ($108,700*37%)		$40,219.00
		(To record share of income in Sanger company)
3	31-Dec	Cash Dr ($26,400*37%)	$9,768.00
		To Investment in Sanger Company Stock		$9,768.00
		(To record dividend received)