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Perry Investments bought 2,000 shares of Able, Inc. common stock on January 1, 2017, for...

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Accounting

Perry Investments bought 2,000 shares of Able, Inc. common stock on January 1, 2017, for $20,000 and 2,000 shares of Baker, Inc. common stock on July 1, 2017 for $24,000. Baker paid $2,400 of previously declared dividends to Perry on December 31, 2017. At the end of 2017, the fair value of the Able stock was $18,000 and the fair value of the Baker stock was $28,000. The stocks were purchased for short-term speculation prior to the effective date of the change in accounting rules for equity investments. Perry owns 10% of each company.

Perry should record the receipt of the Baker dividend as

Multiple Choice

  • DR Cash 2,400 CR Investment in Baker 2,400

  • DR Cash 240 CR Dividend income 240

  • DR Cash 2,400 CR Dividends receivable 2,400

  • DR Dividends receivable 2,400 CR Dividend income 2,400

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