On January 6, 2020, Ling Corp. paid $5,000,000 for its 40 percent investment in True World Inc.
Question:
On January 6, 2020, Ling Corp. paid $5,000,000 for its 40 percent investment in True World Inc. Assume that on December 31 that same year, True World earned net income of $1,800,000 and paid cash dividends of $800,000.
1. What method should Ling Corp. use to account for the investment in True World Inc.? Give your reason.
2. Journalize these three transactions on the books of Ling Corp. Include an explanation for each entry. Ignore any brokerage commission expenses.
3. Post to the Investment in True World Inc. Common Shares T-account. What is its balance after all the transactions are posted?
Step by Step Answer:
Ling Corp should use the equity method to account for the investment in True World Inc because it ...View the full answer
Horngrens Accounting
ISBN: 9780135359785
11th Canadian Edition Volume 2
Authors: Tracie Miller Nobles, Brenda Mattison, Ella Mae Matsumura, Carol A. Meissner, Jo Ann Johnston, Peter R. Norwood
