Dragon Corporation acquired a 7% interest in the outstanding shares of Slayer Inc. on January 1, 2019 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 as noted below. On December 31, 2021 Slayer declared bankruptcy as a result of a series of losses as noted.
$\begin{array}{|r|r|r|}
\hline & \text { Income } & \text { Dividends } \
\hline 2019 & 50,000 & 20,000 \
\hline 2020 & (10,000) & 20,000 \
\hline 2021 & (40,000) & 20,000 \
\hline
\end{array}$ Required:
(a) Prepare the journal entries that Dragon would make in 2019, 2020 and 2021.
(b) Prepare the general ledger account for Dragon's investment in Slayer at all relevant dates.

Question

Dragon Corporation acquired a 7% interest in the outstanding shares of Slayer Inc. on January 1, 2019 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 as noted below. On December 31, 2021 Slayer declared bankruptcy as a result of a series of losses as noted.
 $\begin{array}{|r|r|r|}
\hline & \text { Income } & \text { Dividends } \
\hline 2019 & 50,000 & 20,000 \
\hline 2020 & (10,000) & 20,000 \
\hline 2021 & (40,000) & 20,000 \
\hline
\end{array}$ Required:
(a) Prepare the journal entries that Dragon would make in 2019, 2020 and 2021.
(b) Prepare the general ledger account for Dragon's investment in Slayer at all relevant dates.

Quizplus · Accepted Answer

The Answer of Dragon Corporation acquired a 7% interest in the outstanding shares of Slayer Inc. on January 1, 2019 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 as noted below. On December 31, 2021 Slayer declared bankruptcy as a result of a series of losses as noted.
 $\begin{array}{|r|r|r|}
\hline & \text { Income } & \text { Dividends } \
\hline 2019 & 50,000 & 20,000 \
\hline 2020 & (10,000) & 20,000 \
\hline 2021 & (40,000) & 20,000 \
\hline
\end{array}$ Required:
(a) Prepare the journal entries that Dragon would make in 2019, 2020 and 2021.
(b) Prepare the general ledger account for Dragon's investment in Slayer at all relevant dates.

Dragon Corporation Acquired a 7% Interest in the Outstanding Shares