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Equity Method - Journal entries for Holding Company

Sims Company owns 80% of the common stock of Allied Company. In 2006, Allied reported $200,00 net income and paid cash dividends of $80,000. In 2007, Allied reported a $40,000 net loss and paid $10,000 of dividends.

What are the above journal entries for the above on Sims' books assuming use of the equity method of accounting for the investment in the subsidiary?

Sims 80%

Jan 1 Cash 64,000
Revenue 64,000
From cash dividends

Jan 1 Unrealized loss on Trading 32,000
Trading Securities 32,000

Jan 1 Cash 8,000
Revenue 8,000

I am looking for the correct journal entries to this problem.

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Journal Entries - will be recorded on last of day closing of accounting year.


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Solution Summary

The solution provides Equity method Journal entries for Sims 80% ownership of Allied Company.