PREPARING JOURNAL ENTRIES
Part A
On January 2, 2017, Kesha Company purchased 10,000shares of the stock of Petty Corp., and did not obtain significantinfluence. The investment is intended as a long-terminvestment. The stock was purchased for $5 per share, andrepresents a 10% ownership stake. Petty Corp made $20,000 of netincome in 2017, and paid dividends of $5,000 on December 15, 2017.On December 31, 2017, Petty Corp's stock was trading on the openmarket for $8 per share at the end of the year. Use thisinformation to prepare the General Journal entry(ies) for January 2purchase and the December 15 & 31, 2017 record of income &gain/loss. If no entry is required then write "No EntryRequired."
Part B
On January 1, 2017, Kesha Company purchased asignificant influence shares investment in the Winehouse Companyfor $250,000. This investment balance represents 40% ofthe equity of the Winehouse Company. During 2017,Winehouse Company reported Net Income of $25,000 on November 15,2017 Winehouse Company paid cash dividends of $10,000 to itsshareholders. Use this information to prepare the January 1,November 15 and December 31, 2017 General Journal entry (withoutexplanation.) If no entry is required, then write "No EntryRequired."
