Cody Industries Owns 35% of Macarthy Company B C $\begin{array}{lrr} \text { Dec. 31 Stock Investments} &66,500\\ \text { Revenue from Stock Investments } &&66,500\\\end{array}$

question 73

Short Answer

Cody Industries owns 35% of Macarthy Company. For the current year, Macarthy reports net income of $250,000 and declares and pays a $60,000 cash dividend. Which of the following correctly presents the journal entries to record Cody's equity in Macarthy's net income and the receipt of dividends from Macarthy? a.
$\begin{array}{ll} \text { Dec. 31 Stock Investments } &87,500\\ \text { Revenue from Stock Investments } &&87,500\\ \text { Dec. 31 Cash } &21,000\\ \text { Stock Investments } &&21,000\\\end{array}$


b.
$\begin{array}{lrr} \text { Dec. 31 Stock Investments} &87,500\\ \text { Revenue from Stock Investments } &&87,000\\ \text { Dec. 31 Cash} &60,000\\ \text {Stock Investments } &&60,000\\\end{array}$

c.
$\begin{array}{lrr} \text { Dec. 31 Stock Investments} &66,500\\ \text { Revenue from Stock Investments } &&66,500\\\end{array}$

d.
$\begin{array}{lrr} \text { Dec. 31 Revenue from Stock Investments } &87,500\\ \text {Stock Investments } &&87,500\\ \text { Dec. 31 Stock Investments} &21,000\\ \text { Cash } &&21,000\\\end{array}$

Recognize the tax implications and regulatory requirements for mutual funds.

Understand the diversification benefits and professional management offered by mutual funds.

Explain the differences between various types of mutual funds, including index funds, open-end, and closed-end funds.

Calculate the net asset value (NAV) of mutual funds and understand its significance.

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Definitions:

Subsidiary Company

A company that is completely or partially owned and wholly controlled by another company, which is referred to as the parent company.

Cost Method

An accounting method for investments where the investment is recorded at the purchase cost, without recognizing subsequent changes in market value.

Semiannual Receipt

Payments or incomes that are received twice a year.

Accrued Interest

The amount of interest that has been incurred but not yet paid over a particular period.