On January 1, 2019, Doe Company purchased 3,000 of the 10,000 common shares outstanding of Ray Company
Question:
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:
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:
Required:
Prepare all the 2019 journal entries that Doe should make related to this investment. Show and label all supporting calculations.
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...
Step by Step Answer:
Intermediate Accounting Reporting and Analysis
ISBN: 978-1337788281
3rd edition
Authors: James M. Wahlen, Jefferson P. Jones, Donald Pagach