Marcoff Corporation acquires 30% of the outstanding voting common shares of the Invicta Corporation for $600,000.Marcoff Corporation acquires the investment in Invicta Corporation by buying previously issued shares of Invicta Corporation from other investors. If Invicta Corporation declares and pays a dividend of $30,000 to holders of its common stock, Marcoff Corporation records the following journal entry:

Question

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When Marcoff Corporation receives a dividend from Invicta Corporation, it records the dividend as an increase in cash and a corresponding increase in investment revenue. Since Marcoff owns 30% of Invicta, it receives 30% of the $30,000 dividend, which equals $9,000. This is recorded as cash received and not as an adjustment to the investment account or equity earnings.

Marcoff Corporation Acquires 30% of the Outstanding Voting Common Shares