At a total cost of $2,480,000, Herrera Corporation acquired 160,000 shares of Tran Corp. common stock as a long-term investment. Tran Corp. has 400,000 shares of common stock outstanding, including the shares acquired by Herrera Corporation. Required:
Journalize the entries by Herrera Corporation.

Explanation:

Journalizing is the approach taken by corporate organizations for recording daily operations and transactions in the organization. Organizations use it to produce the final accounts and assess the company's performance and productivity.

Assuming:

the current net income of the Tran Corp. = $510,000  &

A cash dividend of $1.10 / common share is paid by Tran Corp.

Then:

To record entry for income of Trans Corp:

Description                                 Debit ($)        Credit($)

Investment - Tran Corp. stock  

(510000*(160000/400000)         204000

Tran Corp COmpany Income                            204000

(To record income of Tran Corp Company)

The entry record for dividend received by cash:

Description                                    Debit ($)     Credit ($)

Cash  (160000/1.10)                        145,455

Investment - Tran Corp stock                           145,455

(Record recieved dividend)

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