Question

17-07Marigold Corporation purchased for $326,000 a 30% interest in Murphy, Inc. This investment enables Marigold to exert significant influence over Murphy. During the year, Murphy earned net income of $174,000 and paid dividends of $60,000.Prepare Marigold’s journal entries related to this investment.

Answer 1

First we have to calculate Marigold Corporation's share in the net income and Divident paid by Murphy.

Net Income = $174,000.

$174,000 x 30% = $52,200

Dividend = $60,000

$60,000 x 30% = 18,000

The journal entries made by Marigold will be:

Account Title Dr Cr

Equity Investments 326,000

Cash 326,000

Equity Investments 52,200

Revenue from Investment 52,200

Cash 18,000

Equity Investments 18,000