On January 1, 2014, The Timber Company acquired a 12% interest in the Twig Corporation through the purcahse of 72,000 sahres of Twigs common stock, paying $422,000. During 2014, Twig paid $28,000 in total dividends and reported net income of $95,675. The market price of Twigs common stock was $5.44 per share on December 31, 2014. Journalize the following: A. Timbers stock acquisition B. Timbers realized income for 2104 C. Entry or entries to adjust the investment account to its appropriate 12/31/14 balance. Solution Investment in Common Stock Dr    422,000.00 To Bank A/C    422,000.00 (Being investment in common Stock) Bank Account Dr        3,360.00 To Dividend A/C        3,360.00 (Being dividend received(28000*12%) Provision for dimunition in Value Dr      30,320.00 To Investment      30,320.00 (Being decline in value of investment) Profit and loss Ac Dr      30,320.00 To Provision for dimunition in Value        30,320.00 (Being provision charged to profit and Loss Account) Note No of shares      72,000.00 Purchase price    422,000.00 Purchase price per share                 5.86 Purchase price per share at end of year                 5.44 Loss per share                 0.42 Total decline in investment      30,320.00 .

1. On January 1, 2014, The Timber Company acquired a 12% interest in the Twig Corporation
through the purcahse of 72,000 sahres of Twigs common stock, paying $422,000. During 2014,
Twig paid $28,000 in total dividends and reported net income of $95,675. The market price of
Twigs common stock was $5.44 per share on December 31, 2014.
Journalize the following:
A. Timbers stock acquisition
B. Timbers realized income for 2104
C. Entry or entries to adjust the investment account to its appropriate 12/31/14 balance.
Solution
Investment in Common Stock Dr 422,000.00 To Bank A/C 422,000.00 (Being investment in
common Stock) Bank Account Dr 3,360.00 To Dividend A/C 3,360.00 (Being dividend
received(28000*12%) Provision for dimunition in Value Dr 30,320.00 To Investment
30,320.00 (Being decline in value of investment) Profit and loss Ac Dr 30,320.00 To
Provision for dimunition in Value 30,320.00 (Being provision charged to profit and Loss
Account) Note No of shares 72,000.00 Purchase price 422,000.00 Purchase price per share
5.86 Purchase price per share at end of year 5.44 Loss per share
0.42 Total decline in investment 30,320.00