Answer:
Please see find the answer in the explanation!
Explanation:
Situation 1:
First entry:
Bridgeport acquired 10% of shares of Martinez Fashion, the double entry would reduce the cash of Bridgeport and increase the asset, see as follows:
Shares Dr $239200 (18400× $13)
Cash Cr $239200
On June 30, Martinez declared and paid $69400 cash to all stockholders, Bridgeport will be entitled to 10% of the declared and paid dividend, therefore, dividend income will have to be recorded as follows:
Cash/bank Dr $6940
Dividend Income Cr $6940
Situation 2:
Indigo Inc obtained significant influence over Seles corporation (making her an Associate). In a group situation, an associate is equity accounted and is recorded as an investment in the statement of financial position and is also entitled to the profits with the proportion of their ownership. First entry would be to record the associate as an investment, see as follows:
Investment in Associate Dr $84780
Bank/Cash Cr $84780
On june 15 Seles declared and paid cash dividend, Indigo Inc will be entitled to 30% of the dividend, see as follows:
Dividend income= $39100× 30%
Dividend income= $11730
Entry:
Cash/Bank Dr $11730
Dividend income Cr $11730
Unlike Bridgeport Corporation, Indigo Inc will be entitled to 30% of the reported net income as well. The entry is as follows;
Cash/Bank Dr $ 25500 ($85000× 30%)
Income Cr $ 25500
