Question

	Green Corporation acquired45,000 shares of the outstanding common stock of Brown Company for$14.00 per share.
	The following events occurred during the year.
	6/15/2015	Brown declared and paid $0.75 per share cash dividend.
	12/10/2015	Brown declared and paid $0.80 per share cash dividend.
	12/31/2015	Brown reported net income for the year of $425,000.The market price of Brown common stock was $17 per share on thelast day of the year.
	Instructions:
	(a) Prepare the journal entries for Green in 2015,assuming that the purchase of Brown stock constituted less than 10%of Brown's outstanding shares.
	Green treats this investment as available-for-salesecurities.
	(b) Prepare the journal entries for Green in 2015,assuming that the purchase of Brown stock constituted 32% ofBrown's outstanding shares.
	Solutions:
	Date	Account	Debit	Credit
		Less than 10% ownership:
	1/1/2015	Available-for-sale Securities	630,000
		Cash		630,000
		45,000 sh x $14
	6/15/2015	Cash	33,750
		Dividend Revenue		33,750
		45,000 sh x $0.75
	12/10/2015	Cash	36,000
		Dividend Revenue		36,000
		45,000 sh x $0.80
	12/31/15	Available-for-sale Securities	135,000
		Unrealized Gain onAvailable-for-sale Securities		135,000
		45,000 x $17 =$765,000 - $630,000 =$135,000
		32% ownership:
	1/1/2015	Investment in Brown Company	630,000
		Cash		630,000
		45,000 sh x $14
	6/15/2015	Cash	33,750
		Investment in BrownCompany		33,750
		45,000 sh x $0.75
	12/10/2015	Cash	36,000
		Investment in BrownCompany		36,000
		45,000 sh x $0.80
	12/31/2015	Investment in Brown Company	136,000
		Income from BrownCompany		136,000
		$425,000 x 32%