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Horngren'S Financial And Managerial Accounting
Found in: Page 567

Short Answer

Accounting for equity investments

On January 1, 2018, Bark Company invests $10,000 in Roots, Inc. stock. Roots pays Bark a $400 dividend on August 1, 2018. Bark sells the Roots’s stock on August 31, 2018, for $10,450. Assume the investment is categorized as a short-term equity investment and Bark Company does not have significant influence over Roots, Inc.


1. Journalize the transactions for Bark’s investment in Roots’s stock.

Both sides of the journal totals $20,850.

See the step by step solution

Step by Step Solution

Step 1: Definition of Dividend Revenue

The revenue generated through dividends provided by the company to its shareholders is known as dividend revenue.

Step 2: Journal Entry for Transaction of Investment


Accounts and Explanation

Debit $

Credit $

1 Jan 2018

Equity Investment




1 Aug 2018



Dividend revenue


31 Aug 2018



Equity investment


Gain on sale of equity investment




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