Problem - Prepare journal entries. Be sure all dates agree with the problem and are not today's date
Cost method Year 2014
Jan 1 Investor corporations purchased 8,000 shares (20% of investee company's outstanding stock) at a cost of $ 150,000.
May 31 Investee company declared and paid a cash dividends of $1.50 per share
Dec 31 Investee company announced that its net income for the year was $100,000
Cost method Year 2015
Oct 1 Investee company declared and paid a cash dividend of $1.00 per share
Dec 21 Investee company announced its net income for the year in the amount of $ 80,000
Dec 31 Investor corporation sold all of its shares on investee company for $ 178,000 cash
Equity method Year 2016
Jan 1 Investor corporations purchased 8,000 shares (20% of investee company's outstanding stock) at a cost of $ 150,000.
May 31 Investee company declared and paid a cash dividends of $1.50 per share
Dec 31 Investee company announced that its net income for the year was $100,000
Year 2017
Oct 1 Investee company declared and paid a cash dividend of $1.00 per share
Dec 21 Investee company announced its net income for the year in the amount of $ 80,000
Dec 31 Investor corporation sold all of its shares on investee company for $ 178,000 cash
Required:
1. Cost method: Prepare journal entries for years 2014 and 2015 in QuickBooks on Investor Corporation's books using the cost method, which assumes that investor does not have significant influence over Investee (for example, another corporation owns 70% of Investee Company's stock).
2. Equity method: Prepare in QuickBooks the journal entries for years 2016 to 2017 on Investor Corporation's books using the equity method, which assumes that Investor has significant influence over Investee Company.
3. Go to widget at the company name, select settings, and then chart of accounts. Click on cash for cost method and you will see the transactions for the cost method. Click on cash for equity method and you will see the transactions for the equity method. Copy and paste (or export) each to word document, being sure two columns of number show and submit to the assignment area.