On May 1, 2020, Cheng Company, a public company, acquired 176,000 of the 550,000 outstanding common shares from Zahra Company for a total of $1,716,000. This investment is part of Cheng Company's long-term business diversification plan. Cheng Company's year-end is December 31, and it chooses to use the equity method of accounting for its strategic investments. During 2020, the following investment activities occurred. 1) Zahra Company recorded an annual net income of $1,026,000 for its 2019-2020 fiscal year-end of June 30, 2020. 2) Zahra Company paid a cash dividend of $295,000 on July 30, 2020. Required Prepare journal entries to record the acquisition of shares by Cheng Company, the revenue of investment from Zahra Company on June 30, 2020 and the receipt of cash dividends on July 30, 2020. For simplicity, calculate any share of profit strictly as a percentage of the current holdings, although those shares have not been held for a full year. Do not enter dollar signs or commas in the input boxes. Round all answers to the nearest whole number. Debit Credit Date Account Title and Explanation May 1 rocord acauisition of common shares

On May 1, 2020, Cheng Company, a public company, acquired 176,000 of the 550,000 outstanding common shares from Zahra Company for a total of $1,716,000. This investment is part of Cheng Company's long-term business diversification plan. Cheng Company's year-end is December 31, and it chooses to use the equity method of accounting for its strategic investments. During 2020, the following investment activities occurred. 1) Zahra Company recorded an annual net income of $1,026,000 for its 2019-2020 fiscal year-end of June 30, 2020. 2) Zahra Company paid a cash dividend of $295,000 on July 30, 2020. Required Prepare journal entries to record the acquisition of shares by Cheng Company, the revenue of investment from Zahra Company on June 30, 2020 and the receipt of cash dividends on July 30, 2020. For simplicity, calculate any share of profit strictly as a percentage of the current holdings, although those shares have not been held for a full year. Do not enter dollar signs or commas in the input boxes. Round all answers to the nearest whole number. Debit Credit Date Account Title and Explanation May 1 rocord acauisition of common shares

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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