Question

James Corporation acquired 30% of the 100,000 shares of common stock of Mark Corporation at a total cost of $10 per share on April 15,2020. On June 30, Mark Corporation declared and paid a $50,000 dividend. On December 31, Mark Corporation reported net income of $200,000 for the year. Using the Equity method prepare all the necessary journal entries for 2020 for James Corporation.

Answer 1

Solution:

Date	Accounts and Explanation	Debit	Credit
April. 15, 2020	Equity Investment [100000*30%*10]	$      300,000
	Cash		$       300,000
	Purchased investment in stock [equity method]
June. 30, 2020	Cash [50000*30%]	$         15,000
	Equity Investment		$         15,000
	Received cash dividend [equity method]
Dec. 31, 2020	Equity Investment [200000*30%]	$         60,000
	Equity Income		$         60,000
	Record Equity Income [equity method]