EXERCISE 12-7

(a)   Jan.  1     Stock Investments.....................................    180,000

                                  Cash.....................................................                      180,000

        Dec. 31     Cash ($60,000 X 25%)...............................     15,000

                                  Stock Investments.............................                       15,000

                31     Stock Investments.....................................     50,000

                                  Revenue from Stock Investments

                                   ($200,000 X 25%).............................                       50,000

(b)   Investment in Morelli, January 1..........................................         $180,000

        Less:  Dividend received.......................................................            15,000

        Plus:  Share of reported income.................................................     50,000

        Investment in Morelli, December 31....................................         $215,000

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Exercise 12-7

On January 1, Vince Corporation purchased a 25% equity in Morelli Corporation for $180,000. At December 31, Morelli declared and paid a $60,000 cash dividend and reported net income of $200,000.

(a)

Your answer is correct.

Journalize the transactions. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date

Account Titles and Explanation

Debit

Credit

Jan. 1

Dec. 31

(To record dividends received)

Dec. 31

(To record equity in Morelli Corporation's net income)

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(b)

Your answer is correct.

Determine the amount to be reported as an investment in Morelli stock at December 31.

Investment in Morelli December 31

$

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