Dragon Corporation acquired a 7% interest in the outstanding shares of Slayer Inc. on January 1, 2016 at a cost of $200,000. Dragon Corporation was a private company and reported in compliance with the Accounting Standards for Private Enterprises (ASPE) and accounted for Slayer Inc., whose shares were not publicly traded, using the cost method. Slayer reported net income and made dividend payments to its shareholders at noted below. On December 31, 2018 Slayer declared bankruptcy as a result of a series of losses as noted. $$\begin{array} { | l | l | l| }
\hline & \text { Income } & \text { Dividends } \
\hline 2016 & 50,000 & 20,000 \
\hline 2017 & ( 10,000 ) & 20,000 \
\hline 2018 & ( 40,000 ) & 20,000 \
\hline
\end{array}$$ Required:
(a) Prepare the journal entries that Dragon would make in each year.
(b) Prepare the general ledger account for Dragon's investment in Slayer.

Question

Dragon Corporation acquired a 7% interest in the outstanding shares of Slayer Inc. on January 1, 2016 at a cost of $200,000. Dragon Corporation was a private company and reported in compliance with the Accounting Standards for Private Enterprises (ASPE) and accounted for Slayer Inc., whose shares were not publicly traded, using the cost method. Slayer reported net income and made dividend payments to its shareholders at noted below. On December 31, 2018 Slayer declared bankruptcy as a result of a series of losses as noted. $$\begin{array} { | l | l | l| } 
\hline & \text { Income } & \text { Dividends } \
\hline 2016 & 50,000 & 20,000 \
\hline 2017 & ( 10,000 ) & 20,000 \
\hline 2018 & ( 40,000 ) & 20,000 \
\hline
\end{array}$$ Required:
(a) Prepare the journal entries that Dragon would make in each year.
(b) Prepare the general ledger account for Dragon's investment in Slayer.

Quizplus · Accepted Answer

The Answer of Dragon Corporation acquired a 7% interest in the outstanding shares of Slayer Inc. on January 1, 2016 at a cost of $200,000. Dragon Corporation was a private company and reported in compliance with the Accounting Standards for Private Enterprises (ASPE) and accounted for Slayer Inc., whose shares were not publicly traded, using the cost method. Slayer reported net income and made dividend payments to its shareholders at noted below. On December 31, 2018 Slayer declared bankruptcy as a result of a series of losses as noted. $$\begin{array} { | l | l | l| } 
\hline & \text { Income } & \text { Dividends } \
\hline 2016 & 50,000 & 20,000 \
\hline 2017 & ( 10,000 ) & 20,000 \
\hline 2018 & ( 40,000 ) & 20,000 \
\hline
\end{array}$$ Required:
(a) Prepare the journal entries that Dragon would make in each year.
(b) Prepare the general ledger account for Dragon's investment in Slayer.

Dragon Corporation Acquired a 7% Interest in the Outstanding Shares