On January 1, Rook Corporation, a publicly traded company, purchased 25 of Hook Ltd common shares for $800,000 At December 26, Hook declared a $40,000 dividend (Rook received its share that day) and reported net income of $80,000 The shares ' fair value at December 31 was $840,000 (a) Record each o...

a Jan 1 Investment in Associates 800000 Cash 800000 Dec ...

On January 1, Rook Corporation, a publicly traded company, purchased 25% of Hook Ltd. common shares for

Question:

On January 1, Rook Corporation, a publicly traded company, purchased 25% of Hook Ltd. common shares for $800,000. At December 26, Hook declared a $40,000 (Rook received its share that day) and reported net income of $80,000. The shares' fair value at December 31 was $840,000.
(a) Record each of these transactions, assuming Rook has significant influence over Hook and is using the equity method to account for this investment.
(b) How much income would be reported by Rook because of its investment in Hook?
Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...