Roy Company purchased 25% of Dale Company for $600,000 on January 1, 2010. On th
ID: 2360405 • Letter: R
Question
Roy Company purchased 25% of Dale Company for $600,000 on January 1, 2010. On the date of purchase, Dale’s book value was $1,600,000. Excess of cost over book value is due to equipment to be amortized over five years.Journalize the following for 2010 on the books of Roy, assuming Roy uses the equity method:
a. Dale reported a total net income of $500,000. Amortization must be recorded.
Dr. Cr.
b. Dividends paid by Dale amounted to $220,000.
Dr. Cr.
c. The value of Roy’s investment in Dale had climbed to $1,300,000.
d. Determine the balance in the investment account at December 31, 2010.
Explanation / Answer
Journals in the books of Roy for 2010: Date Details Debit Credit 1-Jan Investment in Dale company $600,000 Cash 600,000 31-Dec Investment in Dale company stock 125,000 Income of Dale company 125,000 *Record of 25% of Dale company income,($500,000*25%) 31-Dec Cash 55,000 Investment in Dale company stock 55,000 ($220,000*25%) Dec 31 Valuation Allowance for Trading Investment 700.000 Unrealized Gain on Trading Investments 700,000 (To record increase in investment value) d) Investment in Dale company $600,000 Income of Dale company 125,000 __________ 725,000 Cash 55,000 _____________ 670,000 Date Details Debit Credit 1-Jan Investment in Dale company $600,000 Cash 600,000 31-Dec Investment in Dale company stock 125,000 Income of Dale company 125,000 *Record of 25% of Dale company income,($500,000*25%) 31-Dec Cash 55,000 Investment in Dale company stock 55,000 ($220,000*25%)Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.