On January 2, Ubuy.com paid $190,000 to acquire 25 percent (19,000 shares) of th
ID: 2561122 • Letter: O
Question
On January 2, Ubuy.com paid $190,000 to acquire 25 percent (19,000 shares) of the common stock of E- Net Corporation. The accounting period for both companies ends December 31. July 2 E-Net declared and paid a cash dividend of $5 per share. Dec. 31 E-Net reported net income of $290,000. Required: Prepare the journal entries for the purchase on January 2 and for each of the above transactions that occurred during the year. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) View transaction list Journal entry worksheet 2 Record the acquisition of 19,000 shares (25%) of the common stock of E-Net Corporation. Note: Enter debits before credits. Date General Journal Debit Credit Jan 02Explanation / Answer
1) Acquisition of common stock in E-Net with 25% interest will be treated as investment in subsidiary and this acquisition will result in outflow of cash. the Journal entry to record this transaction will be:
Date General Debit Credit
Jan 2 Investment in E Net Common Stock Account $190,000
Bank Account $190,000
(Record purchase of 19000 shares (25%) in ENet Corporation)
2) The Journal entry to record receipt of dividend will increase cash. Since there are 19000 shares, dividend value is given as $5 per share. Dividend received will be $5*19000=$95,000
Date General Debit Credit
Jul 02 Bank Account $95,000
Dividend Received Account $95,000
(Record Cash dividend received from E Net at $5 per share)
3) There will be no journal entry to recognise the reported net income of E Net
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