Perry Investments bought 2,000 shares of Able, Inc. common stock on January 1, 2017, for...
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Perry Investments bought 2,000 shares of Able, Inc. common stock on January 1, 2017, for $20,000 and 2,000 shares of Baker, Inc. common stock on July 1, 2017 for $24,000. Baker paid $2,400 of previously declared dividends to Perry on December 31, 2017. At the end of 2017, the fair value of the Able stock was $18,000 and the fair value of the Baker stock was $28,000. The stocks were purchased for short-term speculation prior to the effective date of the change in accounting rules for equity investments. Perry owns 10% of each company.
Perry should record the receipt of the Baker dividend as
Multiple Choice
DR Cash 2,400 CR Investment in Baker 2,400
DR Cash 240 CR Dividend income 240
DR Cash 2,400 CR Dividends receivable 2,400
DR Dividends receivable 2,400 CR Dividend income 2,400
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