Answer to Question #153882 in Accounting for nhlaphu

Question

On 2 June 2018 BB acquired 15% interest in Chick Ltd for R2 500 000 excluding transaction costs as a long-term investment by purchasing 140 000 ordinary shares of the total issued shares in the company. On 15 January 2019 Chick Ltd declared an interim dividend of R15 per share to its registered shareholders as at this date. The dividend cash payment was done on 29 January 2019. As at 28 February 2019 the market value of Chick Ltd shares was R25.86 per share.

REQUIRED

Provide the journal entries to record the transactions above 

Answer 1

Shares purchased:

Debit financial investments Credit calculations with Chick Ltd - R 2 500 000

Accrued dividends:

Debit settlements with Brexit (Pty) Ltd Credit other income and expenses - R2 100 000 

Received dividends:

Debit settlement account Credit settlements with Brexit (Pty) Ltd - R 2 1000 000