As a long-term investment at the beginning of the year, Acquisitions, Inc., purchased 2 million shares (20%) of Takeover Target’s 10 million shares outstanding for $38 million. During the year, Takeover Target earned net income of $7.6 million and distributed cash dividends of $0.36 per share.
Required:
Record for Acquisitions, Inc., the purchase of the investment and its share of Takeover Target’s net income and dividends using the equity method.
Journal Entry Worksheet:
1) Record the purchase of common stock.
2) Record the share of net income.
3) Record the receipt of cash dividends.