Question

Micron owns 35% of Martok. Martok pays a total of $47,000 in cash dividends for the period. Micron's entry to record the dividend transaction would include a:
Credit to Long–Term Investments for $16,450.
Debit to Long–Term Investments for $16,450.
Debit to Cash for $47,000.
Credit to Cash for $16,450.
Credit to Investment Revenue for $47,000.


Everrine Corporation owns 3,000 shares of JRW Corporation. JRW Corporation has 25,000 shares of stock outstanding. JRW paid $4 per share in cash dividends to its stockholders. The entry to record the receipt of these dividends is:

Debit Cash, $12,000; credit Long-Term Investments, $12,000.

Debt Long-Term Investment, $12,000; credit Cash, $12,000.

Debit Cash, $12,000; credit Dividend Revenue, $12,000. Debit Unrealized Gain-Equity, $12,000; credit Cash, $12,000.

Debit Cash, $12,000; credit Unrealized Gain-Equity, $12,000.

Answer 1

Answer:

1. Option (A) is correct.

2. Option (C) is correct.

Explanation:

1. Micron's entry to record the dividend transaction is as follows:

Cash A/c      Dr. $16,450

To Long - Term Investments  $16,450

(In this case, since the holding interest is more than 20%, Equity method is used)

workings:

Dividend = $47,000 × 35%

               = $16,450

2. The entry to record the receipt of dividend would be:

Cash A/c     Dr. $12,000

To Dividend Revenue A/c   $12,000

(To record the receipt of dividend)

Workings:

Dividend = 3,000 shares × $4 per share

               = $12,000