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In: Accounting

2. On July 1, 2018, Dynamic Corporation purchased for cash 40% of the outstanding capital stock...

2. On July 1, 2018, Dynamic Corporation purchased for cash 40% of the outstanding capital stock of Cart Company.

Dynamic has a fiscal year end of October 31st and Cart has a fiscal year end of March 31st. On October 31st, it has not yet been determined by Dynamic conclusively whether it has the ability to significantly influence Cart’s business operation. Cart Company’s stock is actively traded on the NASDAQ exchange reported its net income for the period ended October 31st to Dynamic. Cart also paid cash dividends on September 15th and December 15th to Dynamic and its other stockholders. How should Dynamic report the above facts in its October 31, 2018 financial statements. Discuss the rationale for your answer.

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ANSWER

From the above question I noticed 2 points in the view of Dynamic co.
1.on july 1,2018 it has purchased 40% share of the cart co.

the journal entry would be for this..

common stock
             cash


This effect would be reflect to reduce the Cash ( current asset) ,
and the same amount would be reflect on to increase the " share holder equity (liability)" by "acquiring of common stock"

2. on 15 th september ,2018 the cash divedend have received from the cart co.

for this the entry would be

cash a/c
         interm dividend a/c

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ekkarill92 answered 1 year ago
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