My first Magazine AC 501 All Assignments | Page 11

Prepare the adjusting entry (if any) for 2008, assuming the securities
are classified as trading.
Prepare the adjusting entry (if any) for 2008, assuming the securities
are classified as available-for-sale.
Discuss how the amounts reported in the financial statements are
affected by the entries in (a) and (b).
E14-13: (Equity Method) Parent Co. invested $ 1, 000,000 in Sub Co. for
25% of its outstanding stock. Sub Co. pays out 40% of net income in
dividends each year.
Investment in Sub Co.
1,000,000
110,000
44,000
Instructions:
How much was Parent Co.’s shares of Sub Co.’s net income for the
year?
How much was Parent Co.’s shares of Sub Co.’s dividends for the year?
What was Sub Co.’s total net income for the year?
What was Sub Co.’s total dividends for the year?