Answered

Rowan Co. purchases 800 common shares (40%) of JBI Corp. as a long-term investment for $570,000 cash on July 1. JBI Corp. paid $10,250 in total cash dividends on November 1 and reported net income of $205,000 for the year.


(1) - (3) Prepare Rowan's entries to record the purchase of JBI shares, the receipt of its share of JBI dividends and the December 31 year-end adjustment for its share of JBI net income.

Answer :

Answer:

July 1.                                      

                                             Debit    Credit

Investment in JBL corp.   $570,000  

Cash                 $570.000  

(Purchased 800 common shares as long      

term investment)      

Nov 1.

Cash                           $4,100  

Investment in JBL corp.     $4,100  

(To record dividend received)      

Dec 31.

Investment in JBL corp.   $82,000  

Share in net income from JBL corp.  $82,000  

(To record share of net income )      

Step-by-step explanation:

Rowan's entries to record the purchase of JBI shares would be as follows:

                       

July 1.                                      

                                             Debit    Credit

Investment in JBL corp.   $570,000  

Cash                 $570.000  

(Purchased 800 common shares as long      

term investment)      

Nov 1.

Cash                           $4,100  

Investment in JBL corp.     $4,100  

(To record dividend received)      

Dec 31.

Investment in JBL corp.   $82,000  

Share in net income from JBL corp.  $82,000  

(To record share of net income )      

Nov 1.

Cash=10,250*40%=$4,100  

Dec 31.

Investment in JBL corp=205000*40%=$82,000  

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