At a total cost of $6,700,000, Herrera Corporation acquired 238,000 shares of Tran Corp. common stock as a long-term investment. Herrera Corporation uses the equity method of accounting for this investment. Tran Corp. has 700,000 shares of common stock outstanding, including the shares acquired by Herrera Corporation.Required:A. Journalize the entries by Herrera Corporation on December 31 to record the following information (refer to the Chart of Accounts for exact wording of account titles):1. Tran Corp. reports net income of $967,000 for the current period.2. A cash dividend of $0.29 per common share is paid by Tran Corp. during the current period.B. Why is the equity method appropriate for the Tran Corp. investment?
At a total cost of $6,700,000, Herrera Corporation acquired 238,000 shares of Tran Corp. common stock as a long-term investment. Herrera Corporation uses the equity method of accounting for this investment. Tran Corp. has 700,000 shares of common stock outstanding, including the shares acquired by Herrera Corporation.
Required:
A.
1.
Tran Corp. reports net income of $967,000 for the current period.
2.
A cash dividend of $0.29 per common share is paid by Tran Corp. during the current period.
B.
Why is the equity method appropriate for the Tran Corp. investment?
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
