Exercise 17B-17 On January 1, 2017, Flounder Corporation purchased 20% of the co

Question

Exercise 17B-17 On January 1, 2017, Flounder Corporation purchased 20% of the common shares of Culver Company for $196,000. During the year, Culver earned net income of $77,000 and paid dividends of $19,250 Prepare the entries for Flounder to record the purchase and any additional entries related to this investment in Culver Company in 2017. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit To record purchase of stock.) To record receipt of dividends.) To record revenue.)

Explanation / Answer

Journal entries :

Date accounts & explanation debit credit 2017 jan 1 Equity mehtod investment a/c 196000 Cash a/c 196000 (TO record purchase of stock) 2017 dec 31 Equity mehtod investment a/c 15400 Equity in income of investee (77000*20%) 15400 (To record net income) 2017 Dec 31 Cash a/c (19250*20%) 3850 Equity mehtod investment a/c 3850 (To record receipt of dividends)

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