Question

Allstar Corp. had the following long-term equity investment transactions:

Jan. 1, 19	Allstar purchased 1800 shares of Best Buy, Inc. 6000 shares for $60 per share.
Oct. 1, 19	Best Buy, Inc. declared and paid a total cash dividend of $80,000.
Dec. 31, 19 Jan 1, 20	Best Buy, Inc. reported a net income of $250,000 for the year. Allstar Sold 15% of the portfolio of Best Buy, Inc. for $26,000.

Prepare the journal entries Avery Corporation should record for these transactions and events.

1/1/19

10/1/19

12/31/19

1/1/2020

Answer 1

1/1/19   INVESTMENT IN BEST BUY. DR. $108,000 ( 1800 SHARES * $60 PER SHARE)

CASH CR. $108,000

( 1800 SHARES / 6000 SHARES * 100 = 30% HODING)

10/1/19 CASH DR. $24,000 ( $80,000 * 30%)

  INVESTMENT IN BEST BUY. CR. $24,000

12/31/19   INVESTMENT IN BEST BUY. DR. $75,000 ( $250,000 * 30%)

INVESTMENT INCOME CR $75,000

1/1/2020   CASH DR. $26,000

  INVESTMENT IN BEST BUY. CR. $23,850 ($108,000 - $24,000 + $75,000) 15%

GAIN ON SALE OF INVESTMENT CR $2,150 ( $26000 - $23,850)