Accounting for Equity Investments (Basic) Assume an investor purchases all of the stock of the investee...
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Accounting for Equity Investments (Basic) Assume an investor purchases all of the stock of the investee (and, thus, its business) in a stock purchase for $3,000. The reported book values of the investee's net assets equal their fair values. The investee's balance sheet on the date of purchase is as follows: Accounts receivable Inventories Building $300 Mortgage payable $300 600 2400 Stockholders' equity 3000 Total assets $3,300 Total liabilities and equity $3,300 Now, assume, subsequent to the purchase, the investee reports net income of $600 and pays $180 in dividends to the investor. Required a. At what amount will the investee's Stockholders' Equity be reported after income and dividends have been closed to Retained Earnings (assume no other changes to Stockholders' Equity)? $ 0 b. Provide the following journal entries: 1. Record the recognition of Equity Income by the investor. 2. Record the receipt of the $180 dividend. 1. Ro record equity income) 2. Debit Credit 0 0 0 0 0 0 Ro record the receipt of dividends, c. At what amount is the Equity Investment reported on the investor's balance sheet? $ 0 Accounting for Equity Investments (Basic) Assume an investor purchases all of the stock of the investee (and, thus, its business) in a stock purchase for $3,000. The reported book values of the investee's net assets equal their fair values. The investee's balance sheet on the date of purchase is as follows: Accounts receivable Inventories Building $300 Mortgage payable $300 600 2400 Stockholders' equity 3000 Total assets $3,300 Total liabilities and equity $3,300 Now, assume, subsequent to the purchase, the investee reports net income of $600 and pays $180 in dividends to the investor. Required a. At what amount will the investee's Stockholders' Equity be reported after income and dividends have been closed to Retained Earnings (assume no other changes to Stockholders' Equity)? $ 0 b. Provide the following journal entries: 1. Record the recognition of Equity Income by the investor. 2. Record the receipt of the $180 dividend. 1. Ro record equity income) 2. Debit Credit 0 0 0 0 0 0 Ro record the receipt of dividends, c. At what amount is the Equity Investment reported on the investor's balance sheet? $ 0
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