On January 1, Connaught Company purchased 40 percent of the outstanding voting shares of London Company on the open market for $85,000 cash. London paid $10,000 in total cash dividendson December 1 and reported net income of $60,000 for the year ended December 31.Required:1. Prepare the journal entries for the year.2. What accounts and amounts were reported on Connaught’s balance sheet at the end of theyear and on Connaught’s income statement for the year?

Question

On January 1, Connaught Company purchased 40 percent of the outstanding voting shares of London Company on the open market for $85,000 cash. London paid $10,000 in total cash dividends
on December 1 and reported net income of $60,000 for the year ended December 31.
Required:
1. Prepare the journal entries for the year.
2. What accounts and amounts were reported on Connaught’s balance sheet at the end of the
year and on Connaught’s income statement for the year?

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