Question

During the current year, Awning Company reported investment revenue of $4,000 from long-term investments reported using the equity method. The long-term investments account had a beginning balance of $10,000 and an ending balance of $11,000. What was the amount of cash revenue received from these investments?

Answer 1

Answer:

cash dividends: 3,000

Explanation:

We can solve for cash dividends based on how the equity method works:

Beginning investing

+ proportional net income

-  cash dividends received  

Ending investing

beginning + inomce - dividends = ending

  10,000   + 4,000  - cash dividends = 11,000

cash dividends= 14,000 - 11,000

cash dividends = 3,000

when received, the journal entry for the dividends was as follow:

cash       3,000 debit

    investing                   3,000 credit

to record cash received from investment