On January 2,2014,McLachlan Corp.paid $50,000 cash to acquire 400,000 shares of stock in Gradley Corp.These shares represent 40% of Gradley Corp.'s total outstanding stock.McLachlan accounted for this acquisition using the equity method.For the year ended December 31,2014,Gradley Corp.earned $800,000 in net income.How would McLachlan record the related adjusting entry?
A) Debit Cash for $800,000 and credit Dividend Revenue for $800,000.
B) Debit Cash for $320,000 and credit Dividend Revenue for $320,000.
C) Debit Long-Term Investments-Gradley for $800,000 and credit Dividend Revenue for $800,000.
D) Debit Long-Term Investments-Gradley for $320,000 and credit Earnings from Long-Term Investment for $320,000.
E) Debit Long-Term Investments-Gradley for $800,000 and credit Earnings from Long-Term Investment for $800,000.
Correct Answer:
Verified
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