Rowan Co. purchases 100 common shares (40%) of JBI Corp. as a long-term investment for $500,000 cash on July 1. JBI Corp. paid $5,000 in total cash dividends on November 1 and reported net income of $100,000 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.

Question

Ariana

Business

30 July, 22:51

Rowan Co. purchases 100 common shares (40%) of JBI Corp. as a long-term investment for $500,000 cash on July 1. JBI Corp. paid $5,000 in total cash dividends on November 1 and reported net income of $100,000 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.

+2

Answers (1)

Know the Answer?

Timothy Gallagher · Answer 1

this is the investment associate because percentage of holding is more than 20% and Less than 50% and will be accounted for as per IAS-28

investment in Associate equity accounting

Entries in books

Investment held for sale 500000

Cash 500000

to record the purchase of shares for $500000

Cash 5000

Dividend income P/L 5000

to record the dividend income in profit and loss account

No Entries for share of profit in seprate books