On September 5.2006 Soy Company, the 80%-owned subsidiary of pro corporation, de

Question

On September 5.2006 Soy Company, the 80%-owned subsidiary of pro corporation, declared a cash dividend of S1 a share on its 100,000 outstanding shares of S1 par common stock. The dividend was paid on September 26, 2006. For the fiscal year ended September 30, 2006, the first year of the pro-soy affiliation, soy had a net income of $300,000. In addition to goodwill of $80,000, the September 30, 2005 (date of the business combination) working paper elimination (in journal entry format) for Pro Corporation and subsidiary include the following debits: Inventories(first-in, first-out)-soy S60,000 Plant assets (net) (all depreciable over a 10-year economic life, straight-line $80,000 method -soy Instruction Prepare journal entries for Pro Corporation on September 30, 2006, to record its equity method of accounting for the operating results of Soy Company. Use the straight-line method of amortization for discount on long-term debt, and disregard income taxes. Consolidated goodwil was unimpaired as of September 30, 2006.

Explanation / Answer

1-Sep Intercomp dividend receivable 80000
Investment in soy company common stock 80000
18-Sep Cash 80000
Intercompany Dividend Receivable 80000
30-Sep Investment in Soy company Common Stock 980000
Intercompany Investment income 980000

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