Entries for equlty investments: 20%-50% ownership At a total cost of $1,104,000, Herrera Corporation acquired 96,000 shares of Tran Corp. common stock as a long-term investment. Tran Corp. has 300,000 shares of common stock outstanding, induding the shares acquired by Herrera Corporation. a. Journalize the entries by Herrera Corporation to record the following information: If an amount box does not require an entry, leave it blank. 1. Tran Corp. reports net income of $1,990,000 for the current period. 88 2. A cash dividend of $1.10 per common share paid by Tran Corp. during the current period. . Why is the equity method appropriate for the Tran Corp. investment? an investment amount of the outstanding common stock of the investee is presumed to represent significant influence. The quity method is appropriate when the investor exercise significant influence over the investee.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Entries for equity investments: 20%-50% ownership
At a total cost of $1,104,000, Herrera Corporation acquired 96,000 shares of Tran Corp. common stock as a long-term investment. Tran Corp. has
300,000 shares of common stock outstanding, Induding the shares acquired by Herrera Corporation.
a. Journalize the entries by Herrera Corporation to record the following information: If an amount box does not require an entry, leave it blank.
1. Tran Corp. reports net income of $1,990,000 for the current period.
88
2. A cash dividend of $1.10 per common share is paid by Tran Corp. during the current period.
b. Why is the equity method appropriate for the Tran Corp. investment?
An investment amount
of the outstanding common stock of the investee is presumed to represent significant influence. The
equity method is appropriate when the investor
exercise significant influence over the investee.
Transcribed Image Text:Entries for equity investments: 20%-50% ownership At a total cost of $1,104,000, Herrera Corporation acquired 96,000 shares of Tran Corp. common stock as a long-term investment. Tran Corp. has 300,000 shares of common stock outstanding, Induding the shares acquired by Herrera Corporation. a. Journalize the entries by Herrera Corporation to record the following information: If an amount box does not require an entry, leave it blank. 1. Tran Corp. reports net income of $1,990,000 for the current period. 88 2. A cash dividend of $1.10 per common share is paid by Tran Corp. during the current period. b. Why is the equity method appropriate for the Tran Corp. investment? An investment amount of the outstanding common stock of the investee is presumed to represent significant influence. The equity method is appropriate when the investor exercise significant influence over the investee.
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