Tor the lhvestment. 26, Lanier industries owns 45% of McCoy Company. For the cur

Question

Tor the lhvestment. 26, Lanier industries owns 45% of McCoy Company. For the current y Mc Coy reports net income of $250,000 and declares and pays a $60,000 cash dividend. Which of the following correctly presents the journal entries to record Lanier's equity in McCoy's net income and the receipt of dividends from McCoy? a. Dec. 31 Stock Investments 112,500 Dec. 31 Cash...27,000 ents... 112,500 60,000 .. 85,500 Revenue from Investment in McCoy 112,500 27,000 b. Dec. 31 Stock Investm Revenue from Investment in McCoy 112,500 Company 60,000 C. Revenue from Investment in McCoy 85,500 d. Dec. 31 Revenue from Investment itn McCoy Company112,500 112,500 Stock Investment...2700 Dec. 31 Stock Investments. 27,000

Explanation / Answer

Ans : option c

Solution : amount of increase in investment = share of income- share of dividend = 250000 x 45% -60000 x 45%

= $85,500

so entry will be for $ 85,500 I.e. option c

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