Blanton Corporation purchased 12% of the outstanding shares of common stock of Worton Corporation as a long-term investment. Subsequently, Worton Corporation reported net income and declared and paid cash dividends. What journal entry would Blanton Corporation use to record the dividends it receives?

Question

Quizplus · Accepted Answer

Blanton Corporation would record the dividends it receives by debiting Cash and crediting Dividend Revenue. This represents an increase in cash and revenue earned from the investment in Worton Corporation. Option A is incorrect because it decreases the Investment in Worton Corporation account without recognizing the revenue earned. Option C is incorrect because it incorrectly separates the income and dividends of Worton Corporation. Option D is incorrect because it increases the Investment in Worton Corporation account without recognizing the revenue earned.

Blanton Corporation Purchased 12% of the Outstanding Shares of Common