[TBone]

The problem is basically looking for appropriate journal entries to specific investing situations. The following one is what I am asking about:

100,000 shares of Stock C. Stock C was acquired on March 1, year 2, for $15 per share, which is 30% of the outstanding stock of C Corporation. On December 31, year 2, the market price of the stock was $16.25 per share. C Corp. had income of $560,000 during year 2 and paid dividends of $80,000 on December 30, year 2.

They then want the journal entry for the investment INCOME in “C”

I took the 560,000 of income and allocated it to 10 months (since it was purchased March 1) then multiplied by the 30% ownership which gave me $120,000.

The software is telling me that the correct income amount is simply the whole $560k multiplied by the 30% ownership which is $168,000.

Shouldn’t the income amount be adjusted for how long the investor owned the 30%? Why would they be entitled to part of the company’s income for the two months they didn’t own?

(This is the Wiley test bank, by the way)

FAR: 66, 75
AUD: 67, 69, 70, 74, 74
REG: 71, 79
BEC: 73

[M.O.D.]

I too get $140K

BA Mathematics, UC Berkeley
Certificates in CPA and EA preparation, College of San Mateo
CMA I 420, II 470
FAR 91, AUD Feb 2015 (Gleim self-study)

[TBone]

oops i meant $140 in my original post. either way, $168,000 doesnt seem correct, yet Wiley says it is.

FAR: 66, 75
AUD: 67, 69, 70, 74, 74
REG: 71, 79
BEC: 73

[Author]

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