Question

Miller Corporation acquired 30% of the outstanding common stock of Crowell Corporation for $160,000 on January 1, 2018, and obtained significant influence. The purchase price of the shares was equal to their book value. During 2018, the following information is available for Crowell:

Mar. 31 Declared and paid a cash dividend of $50,000.
June 30 Reported semiannual earnings of $120,000 for the first half of 2018.
Sept. 30 Declared and paid a cash dividend of $50,000.
Dec. 31 Reported semiannual earnings of $140,000 for the second half of 2018.

Required:

1. Prepare journal entries for Miller to reflect the preceding information. Refer to the Chart of Accounts provided for the exact wording of the answer choices for text entries.
2. What is the balance in Miller’s investment account on December 31, 2018?

Prepare journal entries for Miller to reflect the 2018 transactions. Refer to the Chart of Accounts provided for the exact wording of the answer choices for text entries. (10 Accounts in the entry)

What is the balance in Miller’s investment account on December 31, 2018? ______________

Answer 1

Solution for 1:

	In the Book Miller Corporation as on 31st Dec 2018
Date	Description	Debit	Credit
1-Jan-18	Investment in common stock A/c	160,000
	To Cash/ Bank a/c		160,000
31-Jan-18	Cash a/c	15000
	To Dividend receivable		15000
	50,000*30%
30-Jun-18	Inv income receivable a/c	36000
	To Inv Income a/c		36000
	120,000*30%
30-Sep-18	Cash a/c	15000
	To Dividend receivable		15000
	50,000*30%
31-Dec-18	Inv income receivable a/c	42000
	To Inv Income a/c		42000
	140,000*30%

Solution 2:

		Miller Corporation
		Common Stock in Crowell Corporation
DR									CR
Date	Particulars	Nominal Value	Dividend	Cost	Date	Particulars	Nominal Value	Dividend	Cost
1-Jan-18	To Cash - Investment in common stock A/c			160,000	31-Jan-18	By Cash - Dividend		15,000
30-Jun-18	To-Investment income share - Dividend		36,000		30-Sep-18	By Cash - Dividend		15,000
31-Dec-18	To-Investment income share - Dividend		42,000		31-Dec-18	By P&L Income b/f		48,000
					31-Dec-18	By balance c/d			160,000
	Total		78,000	160,000		Total		78,000	160,000