On January 1, 2019, Doe Company purchased 3,000 of the 10,000 common shares outstanding of Ray Company

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On January 1, 2019, Doe Company purchased 3,000 of the 10,000 common shares outstanding of Ray Company for $15 per share and obtained significant influence. Doe amortizes its patents over 10 years. Ray’s December 31, 2018, condensed balance sheet is shown here:

$ 10,000 $ 50,000 Current assets Fixed assets (net) Patents (net) Liabilities Common stock, no par Retained earnings 30,

Doe was unable to determine the fair value of Ray’s identifiable net assets shown on the preceding balance sheet. It did, however, determine that Ray uses the straight-line method (no residual value) to depreciate its fixed assets and to amortize its patents over 20 years and 10 years, respectively. At the end of 2019, Ray disclosed the following condensed income statement and retained earnings statement for 2019:

Revenues Expenses Net income $ 70,000 32,000 $102,000 (20,000) $100,000 (68,000) $ 32,000 Beginning retained earnings Ad


Required:
Prepare all the 2019 journal entries that Doe should make related to this investment. Show and label all supporting calculations.

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
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Related Book For  book-img-for-question

Intermediate Accounting Reporting and Analysis

ISBN: 978-1337788281

3rd edition

Authors: James M. Wahlen, Jefferson P. Jones, Donald Pagach

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