Tresh Company purchased 42,000 shares of common stock of Mann Corporation as a long-term investment for $1,000,000. During the year, Mann Corporation reported net income of $200,000 and paid dividends of $80,000.
Instructions
(a) Assuming that the 42,000 shares represent a 15% interest in Mann Corporation:
1. Prepare the journal entry to record the investment in Mann stock.
2. Prepare any entries that Tresh Company should make in accounting for its investment in Mann stock during the year.
3. What is the balance of the Stock Investments account on Tresh Company's books at the end of the year?
(b) Repeat requirement (a) above except assume that the 42,000 shares represent a 25% interest in Mann Corporation.