National Credit Reports Inc
2010
Equity method for stock investment?
On January 15, 2010, National Star Inc. purchased 80,000 shares of Krypton Labs Inc. directly from one of the founders for a price of $55 per share. Krypton has 250,000 shares outstanding, including the National Star shares. On July 2, 2010, Krypton paid $217,000 in total dividends to its shareholders. On December 31, 2010, Krypton reported a net income of $735,000 for the year. National Star uses the equity method in accounting for its investment in Krypton Labs.
I need help with the journalizing for July 2 and Dec 31. Please someone show me how you got you answer.. I know that the cash in debited and the investment acct credited on July 2 and on Dec 31 the investment acc is debited and the income acct credited. I just cant figure out how to do it. help plz
I think you’re right about the entries. As far as the amount goes, you need to figure out what portion of the total amount applies to National Star. You know that National Star holds 80,000 shs, out of a total of 250,000 shares. 80,000 / 250,000 = 0.32 You just need to multiply each figure by 0.32
Good luck
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