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andrew-mc [135]
2 years ago
8

On January 2, Todd Company acquired 40% of the outstanding stock of McGuire Company for $205,000. For the year ending December 3

1, McGuire earned income of $48,000 and paid dividends of $14,000. Required: Prepare the entries for Todd Company for the purchase of the stock, share of McGuire income, and dividends received from McGuire.
Jan. 2__________
Dec. 31 _________
Dec. 31__________
Business
1 answer:
Makovka662 [10]2 years ago
4 0

Answer:

Dr equity investment  $205,000

Cr cash                                          $205,000

Dr equity investment           $19200

Cr share of net income of affiliate company $19200

Dr cash                 $5,600

Cr equity investment       $5,600

Explanation:

The cash of $205,000 paid for the equity investment would be credited to cash account while equity investment is debited with the same amount.

The share of Todd Company from the earned income is 40% of the earned income of $48,000 which is $19200 .

The share of dividends that accrued to Todd is 40% of $14,000 dividends paid which is $5,600

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Data provided in the question:

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