X Corporation created Y Corporation with a transfer of $1,000 cash. During Y Corp.’s first year of operations, it generated a net loss of $50 and paid no dividends. During Y Corp.’s second year of operations, it generated net income of $100 and paid cash dividends of $30. (2.5 marks)

Required:

A. Pass journal entries in the books of X corp. in year 1 and year 2 using equity method.

B. What is the balance of investment account at the end of year 2 using equity method?

C. Pass journal entries in the books of X corp. in year 1 and year 2 using cost Method.

D. What is the balance of investment account at the end of year 2 using cost method?

Answer rating: 100% (QA)

A Ist Year X Incorporation 1 Started Business with cash account 1000 Capi... View the full answer