Question

On January 1, Cullumber Corporation purchased a 25% equity in Helbert Corporation for $182,000. At December 31, Helbert declared and paid a $47,900 cash dividend and reported net income of $236,500.

Required:
Journalize the transactions.

Answer 1

Answer:

January 1

Debit : Investment in Helbert Corporation $182,000

Credit : Cash $182,000

Being Investment in Associate

Elimination Journal:

Debit : Investment in Associate ($236,500 x 25%) $59,125

Credit : Share of Profits ($236,500 x 25%)  $59,125

December 31

Debit : Cash ($47,900 x 25%)  $11,975

Credit : Dividend Income  ($47,900 x 25%) $11,975

Being Dividend Income Received from Associate

Elimination Journal:

Debit : Dividend Income $11,975

Credit : Investment in Associate $11,975

Explanation:

Cullumber Corporation  25% equity in Helbert Corporation represents an investment in Associate. This is because, Cullumber Corporation has significant control of  Helbert Corporation ( more than 20% voting rights).

Note : I have also included consolidation elimination journals !