Answers given for all. Can you explain each with formulas.

23. On January 1, 2019, Windy Meadows Corp. acquired a 10% interest in Jones Enterprises for $20,000. The stock has a readily determinable fair value, so the investor measures the Equity Investment at fair value with all unrealized gains and losses flowing through net income. On December 31, 2019 the fair value of the 10% common stock investment is $24,000.

On April 1, 2020, Windy Meadows acquired an additional 20% Jones's common stock for $52,000 and gains the ability to exert significant influence over its investment and will begin to use the equity method for its investment.

What is the amount of the unrealized holding gain or loss that would be required on January 1, 2020? to appropriately transition to the equity method?

b. $ 2,000

Answer: b

24) Spring Valley Corp. purchased a 40% interest in A1 Automotive Company on July 1, 2020. On September 23, 2020, A1 Automotive paid dividends of $50,000 to its common stockholders. The investee reported 2020 net income of $150,000, which was earned evenly throughout the year.

What amount of Equity Income should Spring Valley report in its 2020 income statement?

b. $30,000

Answer: b

25) Investor owns 30% of Investee and applies the equity method. In 2020, Investor sells merchandise costing $240,000 to Investee for $300,000. Investee's ending inventory includes $50,000 purchased from Investor.

What amount of unrealized gross profit must be deferred in the equity method entry?

a. $ 3,000

Answer: a

26) Assume the facts in Question 29. Which of the following is the correct equity method entry to defer the unrealized gross profit?

a. Equity Income 3,000

Equity Investment 3,000

answer: a