At a total cost of $5,600,000, Herrera Corporation acquired 280,000 shares of Tran Corp. common stock as a long-term investment.
1 answer:
At a total cost of $5,600,000, Herrera Corporation acquired 280,000 shares of Tran Corp. common stock as a long-term investment. Herrera Corporation uses the equity method of accounting for this investment. Tran Corp. has 800,000 shares of common stock outstanding, including the shares acquired by Herrera Corporation.
Required:
A. Journalize the entries by Herrera Corporation on December 31 to record the following information (refer to the Chart of Accounts for exact wording of account titles):
1. Tran Corp. reports net income of $600,000 for the current period.
2. A cash dividend of $0.50 per common share is paid by Tran Corp. during the current period.
B. Why is the equity method appropriate for the Tran Corp. investment?
Equity is the amount of capital invested or owned by way of the owner of a corporation. The fairness is evaluated by using the distinction between liabilities and assets recorded at the stability sheet of a employer.
A stock is a trendy term used to explain the ownership certificate of any business enterprise. A percentage, then again, refers back to the inventory certificates of a selected enterprise. conserving a specific corporation's percentage makes you a shareholder. Description: shares are of two sorts—common and favored
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