At the beginning of 20X1,Anwar Ltd.acquired 15% of the voting shares of Cruz Co.for $150,000.Anwar does not have any significant influence over Cruz.Anwar reports the investment using the cost method.In 20X1,Cruz earned net income of $70,000 and paid dividends of $40,000.In 20X2,Cruz earned net income of $80,000 and paid dividends of $100,000.At the end of 20X2,what journal entry should Anwar make to record the dividends from Cruz?
D)No entry is required

Question

Quizplus · Accepted Answer

Since Anwar reports the investment using the cost method, dividends from Cruz should be recorded when received. Anwar received dividends of $100,000 in 20X2, so the journal entry should be:

Debit: Cash $100,000
Credit: Investment in Cruz $100,000

Therefore, the correct answer is choice C.

At the Beginning of 20X1,Anwar Ltd