0 0 Equity method journal entries (price greater than book value) An investor purchases a 25% interest in an investee company, and the investor concludes that it can exert significant influence over the investee. The book value of the investee's Stockholders' Equity on the acquisition date is $500,000, and the investor purchases its 25% interest for $145,000. The investor is willing to pay the purchase price because the investee owns an unrecorded internally developed) patent that the investor estimates is worth $80,000. The patent has a remaining useful life of 10 years. Subsequent to the acquisition, the investee reports net income of $100,000, and pays a cash dividend to the investor of $20,000. At the end of the first year, the investor sells the Equity Investment for $180,000. Prepare all of the required journal entries to account for this Equity Investment during the year. General Journal Description Debit Credit Equity investment 145,000 Cash 0 145,000 To record purchase of investment Equity investment 25,000 Equity income 25,000 To record equity income. Cash 1,000 X 0 Equity investment 0 1,000 X To record receipt of cash dividend. Cash X 2,000 Equity investment 2,000 To record amortization expense. Cash 180,000 0 Gain on sale 0 13,000 X Equity investment 0 167,000 X To record sale of investment. 0 0