Answer Happy

Entries for equity investments: 20%-50% ownership At a total cost of $730,000, Herrera Corporation acquired 50,000 shares of Tran Corp. common stock as a long-term investment. Tran Corp. has 200,000 shares of common stock outstanding, including the shares acquired by Herrera Corporation. a. Journalize the entries by Herrera Corporation to record the following information: If an amount box does not require an entry, leave it blank. 1. Tran Corp. reports net income of $1,310,000 for the current period. 8 2. A cash dividend of $1.50 per common share is paid by Tran Corp. during the current period. b. Why is the equity method appropriate for the Tran Corp. investment? An investment amount appropriate when the investor of the outstanding common stock of the investee is presumed to represent significant influence. The equity method is exercise significant influence over the investee.