Bramble Locomotive Corporation purchased for $617,000 a 40% interest in Lopez Ra
ID: 2331291 • Letter: B
Question
Bramble Locomotive Corporation purchased for $617,000 a 40% interest in Lopez Railways, Inc. This investment enables Bramble Locomotive to exert significant influence over Lopez Railways. During the year, Lopez Railways earned net income of $163,000 and paid dividends of $22,000. Prepare Bramble Locomotive’s journal entries related to this investment. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit (To record investment) (To record share in net income) (To record share in dividends
Explanation / Answer
Journal entry:
Date account and explanation debit credit Investment in Lopez railways inc 617000 Cash 617000 (To record investment) Investment in Lopez railways inc (163000*40%) 65200 Investment revenue 65200 (To record share in net income) Cash (22000*40%) 8800 Investment in Lopez railways inc 8800 (To record share in dividends)