Question
An investor purchases a 30% interest in an investee company, and the investor concludes that it can exert significant influence over the investee. The book
An investor purchases a 30% interest in an investee company, and the investor concludes that it can exert significant influence over the investee. The book value of the investees Stockholders Equity on the acquisition date is $400,000, and the investor purchases its 30% interest for $156,000. The investor is willing to pay the purchase price because the investee owns an unrecorded (internally developed) patent that the investor estimates is worth $120,000. The patent has a remaining useful life of 10 years. Subsequent to the acquisition, the investee reports net income of $90,000, and pays a cash dividend to the investor of $13,000. At the end of the first year, the investor sells the Equity Investment for $195,000. Prepare all of the required journal entries to account for this Equity Investment during the year.
AnswerCashEquity incomeEquity investmentGain on saleLoss on sale | Answer | |
AnswerCashEquity incomeEquity investmentGain on saleLoss on sale | Answer | Answer |
To record purchase of investment. | ||
AnswerCashEquity incomeEquity investmentGain on saleLoss on sale | Answer | Answer |
AnswerCashEquity incomeEquity investmentGain on saleLoss on sale | Answer | Answer |
To record equity income. | ||
AnswerCashEquity incomeEquity investmentGain on saleLoss on sale | Answer | Answer |
AnswerCashEquity incomeEquity investmentGain on saleLoss on sale | Answer | Answer |
To record receipt of cash dividend. | ||
AnswerCashEquity incomeEquity investmentGain on saleLoss on sale | Answer | Answer |
AnswerCashEquity incomeEquity investmentGain on saleLoss on sale | Answer | Answer |
To record amortization expense. | ||
AnswerCashEquity incomeEquity investmentGain on saleLoss on sale | Answer | Answer |
AnswerCashEquity incomeEquity investmentGain on saleLoss on sale | Answer | Answer |
Equity investment | Answer | Answer |
To record sale of investment. |
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