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ehidna [41]
3 years ago
5

Mitchell Corporation pays $10 million to acquire a 30 percent interest in Turner Corporation’s stock on January 1, 2020, and rep

orts the investment using the equity method. Any basis difference is attributed to goodwill. During 2020, Turner reports net income of $1,000,000, which includes $50,000 in realized and unrealized gains on trading securities. Turner also reports $80,000 in unrealized losses on AFS securities in other comprehensive income, and pays dividends of $250,000 in 2020. Required: Prepare Mitchell’s journal entries to record the above events for 2020.
Business
1 answer:
Serjik [45]3 years ago
8 0

Answer:

The Journal entries are for January 1, 2020 and January 31st, 2020 and they are explained and detailed in the explanation.

Explanation:

The question is to prepare the Journal entries for the Year 2020 for the Events of Mitchell Corporation

Date            Particulars                                          Debit                        Credit

Jan 1,           Mitchell's Investment in turner      $10,000,000

            Cash Ac (paid for the investment)                                    $10,000,000

Being the record of $10,000,000 paid for investment in Turner

Date            Particulars                                          Debit                       Credit

Dec 31,          Investment in Turner Corp            

                     (0.3 x 1,000,000)                           $300,000

                     Income from Turner (based on                                 $300,000

                    Mitchell's equity)

   Being the income for Mitchell as a result of equity in Turner

Date            Particulars                                          Debit                       Credit

Dec 31,         Cash A/c                                         $75,000          

                     (0.3 x 250,000)                                          

                   Investment in Turner                                                   $75,000

Being the recording of Dividend received by Mitchell from the investment in Turner

Date            Particulars                                              Debit                    Credit

Dec 31,         Other Comprehensive Income A/c     24,000        

                     (0.3 x 80,000)                                          

                   Investment in Turner                                                   $24,000

Being the recording of the Unrealised Loss.

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3. Post the journal entries to four-column accounts in the ledger,

I used an excel spreadsheet to answer questions 2 and 3

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In order to prepare a trial balance we must prepare an income statement first.

Service revenue $6,800

Salaries expense -$2,400

Rent expense -$2,100

<u>Utilities expense -$650 </u>

Net income $1,650

retained earnings = net income - dividends = $1,650 - $3,200 = -$1,550

  Theodore McMahon, Attorney

               Balance Sheet

<u>For the Month Ended April 30, 2018</u>

Assets:

Cash $23,400

Accounts receivable $1,000

Prepaid insurance $3,600

Office supplies $1,100

Furniture $1,300

Land $30,000

Building $150,000

Total assets: $210,400

Liabilities and Equity:

Accounts payable $1,950

Notes payable $140,000

Common stock $70,000

Retained earnings ($1,550)

Total liabilities and equity: $210,400

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7 0
3 years ago
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