Question

Adkins Appliances buys 10,000 shares of stock in Charlie Company for $10 per share on January 2 of the current year. Adkins owns 35% of Charlie Companyâs voting stock, has significant influence in decision making, and intends to hold on to it for several years. On March 31, a $2.50 per share dividend is paid. What is the journal entry to record the dividend received?

Answer 1

Answer:

cash         25,000 debit

 Charlie investment      25,000 credit

Explanation:

10,000 sahres x 2.5 = 25,000

Because the company has significant influence the dividend are not treated as gains.

Under equity-method is moving an asset (cash) from one place (charlie) to another (parent company) So no gain is recognize.

cash         25,000 debit

 Charlie investment      25,000 credit