Question

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.

Requirements

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

Short answer

Both sides of the journal totals$20,850.

Step-by-step solution

Definition of Dividend Revenue

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

Journal Entry for Transaction of Investment

Date	Accounts and Explanation	Debit $	Credit $
1 Jan 2018	Equity Investment	$10,000
	Cash		$10,000
1 Aug 2018	Cash	$400
	Dividend revenue		$400
31 Aug 2018	Cash	$10,450
	Equity investment		$10,000
	Gain on sale of equity investment		$450
		$20,850	$20,850