Question

On January 1, 2020, Bonita Corporation purchased 20% of the common stock outstanding of Sandhill Corporation for $265000. During 2020, Sandhill Corporation reported net income of $82000 and paid cash dividends of $43000.
The balance of the Stock Investments—Sandhill account on the books of Bonita Corporation at December 31, 2020 is ______.

Answer 1

Answer:

The balance of the Stock Investments—Sandhill account on the books of Bonita Corporation at December 31, 2020 is $272,800 (= $265,000 - $8,600 + $16,400)

Explanation:

the journal entries to record the transactions are:

January 1, 2020, Bonita Corporation purchases 20% of Sandhill Corporation

Dr Investment in Sandhill Corporation 265,000

    Cr Cash 265,000

xx, 2020, Sandhill Corporation distributed $43,000 in cash dividends

Dr Cash 8,600

    Cr Investment in Sandhill Corporation 8,600

yy, 2020, Sandhill Corporation reported net income $82,000

Dr Investment in Sandhill Corporation 16,400

    Cr Revenue on investment in Sandhill Corporation 16,400