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29 May, 08:22

Adkins Appliances buys 10,000 shares of stock in Charlie Company for $10 per share on January 2 of the current year. Adkins owns 35% of Charlie Companyâs voting stock, has significant influence in decision making, and intends to hold on to it for several years. On March 31, a $2.50 per share dividend is paid. What is the journal entry to record the dividend received?

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  1. 29 May, 08:47
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    cash 25,000 debit

    Charlie investment 25,000 credit

    Explanation:

    10,000 sahres x 2.5 = 25,000

    Because the company has significant influence the dividend are not treated as gains.

    Under equity-method is moving an asset (cash) from one place (charlie) to another (parent company) So no gain is recognize.

    cash 25,000 debit

    Charlie investment 25,000 credit
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