On January 1, 2016, Bravo- Zulu Company purchased 10,000 shares of the stock of

Question

On January 1, 2016, Bravo- Zulu Company purchased 10,000 shares of the stock of Rayco, and did obtain significant a 30% ownership stake. Rayco made $25,000 of net income in 2016, and paid dividends of $10,000. Requirements: inftuence. The investment is intended as a long-term investment. The stock was purchased for $90,000, and represents a. Prepare the January 1 and December 31 general journal entries for Bravo Zulu Company. b. How much should the Bravo- Zlu Company report on the balance sheet for the investment in Rayco at the end of 2016?

Explanation / Answer

a.

b. Bravo-Zulu Company should report the Investment in Rayco at $94500 ($90000 - $3000 + $7500) on the balance sheet for 2016.

Date Account Titles and Explanation Debit Credit Jan. 1, 2016 Investment in Rayco 90000 Cash 90000 (To record purchase of investment) Dec. 31, 2016 Cash ($10000 x 30%) 3000 Investment in Rayco 3000 (To records dividend received on investment) Dec. 31, 2016 Investment in Rayco ($25000 x 30%) 7500 Investment income 7500 (To record share in Rayco's net income)

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