Question #3 (7 points) Amount invested in TO Industries common stock Investment

Question

Question #3 (7 points) Amount invested in TO Industries common stock Investment classification Dividends paid by TO Industries Net income by TO Industries $2,000,000 available-for-sale $1,000,000 total $5,000,000 total Treat Parts (A) and (B) as separate transactions. Part (A) The $2,000,000 investment in TO Industries represents 5% of all outstanding common stock of TO Industries. Show all journal entries including the purchase of the investment with cash. GENERAL JOURNAL Date Description DR CR Part (B The $2,000,000 investment in To Industries represents 40% of all outstanding common tock of TO Industries. Show all journal entries including the purchase of the investment ith cash. GENERAL JOURNAL DR CR Description

Explanation / Answer

GENERAL JOURNAL Date Description DR CR (A) Investment in TO Industries 2000000 Cash 2000000 (To record investment in TO Industries stock) Cash 50000 Dividend revenue ($1000000 x 5%) 50000 (To record dividend on investment in TO Industries) (B) Investment in TO Industries 2000000 Cash 2000000 (To record investment in TO Industries stock) Cash ($1000000 x 40%) 400000 Investment in TO Industries 400000 (To record dividend on investment in TO Industries) Investment in TO Industries 2000000 Investment income ($5000000 x 40%) 2000000 (To record share in net income of TO Industries)

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