Equity Method for Stock Investment At a total cost of $2,016,000, Herrera Corporation acquired 144,000 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 400,000 shares of common stock outstanding, including the shares acquired by Herrera Corporation. a. Journalize the entries by Herrera Corporation to record the following information: 1. Tran Corp. reports net income of $3,630,000 for the current period. fill in the blank 913f64045042048_2 fill in the blank 913f64045042048_4 2. A cash dividend of $1.20 per common share is paid by Tran Corp. during the current period. fill in the blank d630b8f5efbbfe1_2 fill in the blank d630b8f5efbbfe1_4 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.
Equity Method for Stock Investment
At a total cost of $2,016,000, Herrera Corporation acquired 144,000 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 400,000 shares of common stock outstanding, including the shares acquired by Herrera Corporation.
a.
1. Tran Corp. reports net income of $3,630,000 for the current period.
| fill in the blank 913f64045042048_2 | |||
| fill in the blank 913f64045042048_4 |
2. A cash dividend of $1.20 per common share is paid by Tran Corp. during the current period.
| fill in the blank d630b8f5efbbfe1_2 | |||
| fill in the blank d630b8f5efbbfe1_4 |
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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