On January 2, Todd Company acquired 40% of the outstanding stock of McGuire Company for $205,000. For the year ending December 31, McGuire earned income of $48,000 and paid dividends of $14,000. Required: Prepare the entries for Todd Company for the purchase of the stock, share of McGuire income, and dividends received from McGuire.

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Business

Kyla

31 March, 16:33

On January 2, Todd Company acquired 40% of the outstanding stock of McGuire Company for $205,000. For the year ending December 31, McGuire earned income of $48,000 and paid dividends of $14,000. Required: Prepare the entries for Todd Company for the purchase of the stock, share of McGuire income, and dividends received from McGuire.

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Julie Chapman · Answer 1

The entries for Todd Company for the purchase of the stock, share of McGuire income, and dividends received from McGuire would be as follows:

debit credit

jan 2

Investment in equity $205,000

cash $205,000

[Investment made]

dec3 1

Investment in equity $19,200

share in net income of affilates $19,200

[share in net income recorded]

dec 31

cash $5,600

dividend income $5,600

[dividend received]

Explanation:

The entries for Todd Company for the purchase of the stock, share of McGuire income, and dividends received from McGuire would be as follows:

debit credit

jan 2

Investment in equity $205,000

cash $205,000

[Investment made]

dec3 1

Investment in equity $19,200

share in net income of affilates $19,200

[share in net income recorded]

share in net income of affilates=$48,000*0.40=$19,200

dec 31

cash $5,600

dividend income $5,600

[dividend received

dividend income=14000*0.40=$5,600