On January 1, 2018, American Corporation purchased 25% of the outstanding voting shares of Short Supplies common stock for $210,000 cash. On that date, Short's book value and fair value were both $840,000. The equity method is deemed appropriate for this investment. Short's net income reported on December 31, 2018, was $80,000. During 2018, Short also paid cash dividends in the amount of $24,000.
Required:
Prepare the journal entries necessary to record the above information on American Corporation's books during 2018.

Question

Quizplus · Accepted Answer

The Answer of On January 1, 2018, American Corporation purchased 25% of the outstanding voting shares of Short Supplies common stock for $210,000 cash. On that date, Short's book value and fair value were both $840,000. The equity method is deemed appropriate for this investment. Short's net income reported on December 31, 2018, was $80,000. During 2018, Short also paid cash dividends in the amount of $24,000.
Required:
Prepare the journal entries necessary to record the above information on American Corporation's books during 2018.

On January 1, 2018, American Corporation Purchased 25% of the Outstanding