Available for Equity Method
Investments
Illustrative Entries
| 4-1-X3 |
Investment |
50,000 |
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|
Cash |
50,000 |
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| To record the purchase of 5,000 shares of Legg stock at $10 per share. Legg has 20,000 shares outstanding, and the investment in 25% of Legg (5,000/20,000 = 25%) is sufficient to give the investor significant influence |
| 6-30-X3 |
Investment |
2,500 |
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|
Investment Income |
2,5000 |
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| To record investor's share of Legg's reported income (25% X $10,000) |
| 7-01-X3 |
Cash |
1,000 |
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|
Investment |
1,000 |
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| To record the receipt of $1,000 in dividends from Legg -- Legg declared and paid a total of $4,000 ($4,000 X 25% = $1,000) |