Draft Co. purchased 14,000 shares of Hamburg Corporation's 40,000 shares of common stock on January 1. This represented 35% of Hamburg's outstanding shares and gave Draft Co. significant influence over Hamburg's management and operations. On October 11, Hamburg declared and paid cash dividends of $30,000. On December 31, Hamburg reported net income of $125,000 for the year. Prepare the journal entries Draft Co. should record to account for the dividends received and the earnings reported by Hamburg Corporation.
What will be an ideal response?
| ? | ? | ? | ? |
| Oct 11 | Cash [$30,000 * 35%] | 10,500 | ? |
| ? | Equity Method Investments | ? | 10,500 |
| Dec 31 | Equity Method Investments | 43,750 | ? |
| ? | Earnings From Equity Method Investments | ? | ? |
| ? | ($125,000 * 35%) | ? | 43,750 |
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