Max Inc. acquires 40% of the shares of Guarasci Inc. for $80,000 on January 1, 2013. During

Question:

Max Inc. acquires 40% of the shares of Guarasci Inc. for $80,000 on January 1, 2013. During 2013, Guarasci earned $50,000 and paid dividends to its shareholders of $10,000. During 2014, Guarasci incurred a loss of $5,000 but continued to pay a $10,000 to all shareholders.
Required
(a) Prepare the journal entries that Max Inc. would make in each of the years 2013 and 2014.
(b) Indicate the balance in the Investment in Guarasci on the for the years ended 2013 and 2014.
Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...