On January 10, 2012, Badger Co. purchased 30% of the outstanding stock of Crest Co. for $123,000.

Question:

On January 10, 2012, Badger Co. purchased 30% of the outstanding stock of Crest Co. for $123,000. Crest paid total dividend to all shareholders of $15,000 on July 15. Crest had a net loss of $25,000 for 2012.

a. Journalize Badger’s purchase of the stock, receipt of dividend, and adjusting entry for the equity loss in Crest Co. stock.

b. Compute the balance of Investment in Crest Co. Stock for December 31, 2012.

c. How does valuing an investment under the equity method differ from valuing an investment at fair value?

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...