On January 1, Year 7, Turtle Company purchased 6,000 of the 20,000 outstanding shares of Star Company’s voting common stock for $25 a share. Spruce reports a net income of $450,000 for year 7. Star declares $75,000 of dividends in year 7. The market value of Star Company common stock is $28 a share on December 31, year 7.

Note: Below is a list of account names to choose from to answer the journal entry questions below.

Cash	Dividends Receivable
Common Stock	Investment in Turtle
Dividend Revenue	Investment in Star
Dividend Declared	Investment Revenue
Dividends Payable	None

a. Make the 1/1/Y7 journal entry on Turtle’s books to record the investment in Star.

Account	Debit	Credit

b. Make the Year 7 journal entry needed on Turtle’s books when Star declares dividends.

Account	Debit	Credit

c. Make the Year 7 journal entry needed on Turtle’s books when Star reports Net Income.

Account	Debit	Credit

d. Make the 12/31/Y7 journal entry needed on Turtle’s books to recognize the change in the value of Star Company shares. (If a journal entry is not needed, write None in ALL four spaces. )

Account	Debit	Credit

Answer rating: 100% (QA)

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