Shay Corporation owns equity-method investments in several companies. Shay paid $1,600,000 to acquire a 25% investment in

Question:

Shay Corporation owns equity-method investments in several companies. Shay paid $1,600,000 to acquire a 25% investment in Faulk Software Company. Faulk reported net income of $620,000 for the first year and declared and paid cash dividends of $480,000.

Requirements

1. Record the following in Shay’s journal:

(a) The purchase of the investment,

(b) Shay’s proportion of Faulk’s net income,

2. What is the ending balance in Shay’s investment account?

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...

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