On January 3, 2013, Roberts Company purchased 30% of the 100,000 shares of commo

Question

On January 3, 2013, Roberts Company purchased 30% of the 100,000 shares of common stock of Thomas Corporation, paying $1,500,000. There was no goodwill or other cost allocation associated with the investment. Roberts has significant influence over Thomas. During 2013, Thomas reported income of $300,000 and paid dividends of $100,000. On January 4, 2014, Roberts sold 15,000 shares for $800,000. What is the appropriate journal entry to record the sale of the 15,000 shares?

Please help with the steps of the calculations

Explanation / Answer

Since Roberts has significant influence over Thomas, Equity Method will be followed.

Entry for Investment (30000 shares)

Recording Net Income of Thomas Corp

Recording Dividend Income of Thomas Corp

Value of Investment sold

Journal Entry to record sale of investment (15000 shares)

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