On January 1, Kingman Corporation purchased a 40% equity in Lewis Company for $360,000. At December...

On January 1, Kingman Corporation purchased a 40% equity in Lewis Company for $360,000. At December 31, Lewis declared and paid a $40,000 cash dividend and reported net income of $98,000. Prepare the necessary journal entries for Kingman Corporation.

Expert Solution

IN THE QUESTION, INVESTMENT IN LEWIS COMPANY ACCOUNTED BASED ON EQUITY METHOD, WHERE INVESTMENT IS RECOREDED AT PURCHASE PRICE, SHARE OF PROFIT AT THE END OF REPORTING PERIOD WILL BE ADDED TO CARRYING VALUE OF INVESTMENT AND DEDUCT DIVIDEND AND SHARE OF LOSS FROM CARRYING VALUE OF INVESTMENT.

COMMENT IT IF ANY ENTRY IS MISSING OR FOR CONCEPTUAL CLARITY.

ekkarill92 answered 2 years ago

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