Question

Blanton corporation purchased 17% of the outstanding shares of common stock of worton corporation as a long-term investment. subsequently, worton corporation reported net income and declared and paid cash dividends. what journal entry would blanton corporation use to record dividends from worton corporation?

Answer 1

This is an investment less than 20 %, so the equity method will not be used. Rather, it will be classified as available for sale investment. The dividend received from the Worton Corporation by Blanton Corporation will be recorded as -

Cash ......... Dr. XXXX

Dividend Revenue ....... Cr. XXXX