Superb Professors

On January 1, 2018, Alamar Corporation acquired a 42 percent interest in Burks, Inc., for $185,000. On that date, Burks's balance sheet disclosed net assets with both a fair and book value of $337,000. During 2018, Burks reported net income of $84,000 and declared and paid cash dividends of $24,000. Alamar sold inventory costing $29,000 to Burks during 2018 for $41,000. Burks used all of this merchandise in its operations during 2018. Prepare all of Alamar's 2018 journal entries to apply the equity method to this investment.(If no entry is required for a transaction/event, select “No journal entry required” in the first account field.)
(a) Record the acquistion of a 42 percent interest in Burks.
Transaction
General Journal
Debit
Credit
1
Investment in Burks, Inc.
Cash
(b) Record the 42 percent income earned during period by Burks, an investment recorded by means of the equity method
Transaction
General Journal
Debit
Credit
2
Investment in Burks, Inc.
Equity in investee income
(c) Record the investee dividend declaration
Transaction
General Journal
Debit
Credit
3
Dividend receivable
Investment in Burks, Inc.
(d) Record the collection of dividend from investee.
Transaction
General Journal
Debit
Credit
4
Cash
Dividend receivable

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