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Change from the fair value method to the equity method Assume an investor company acquires for $320,000 an 8% investment in the common stock of
Change from the fair value method to the equity method Assume an investor company acquires for $320,000 an 8% investment in the common stock of an investee company on February 15, 2018. The investor determined the common stock of the investee has a readily determinable fair value. On December 31, 2018, the fair value of the 8% common stock investment is $340,000, and the investor company made made all of the appropriate adjustments in preparation of the annual financial statements. On March 1, 2019, the investor company acquires an additional 17% of common stock of the investee for $765,000, thereby increasing the investor's overall ownership interest to 25%. Required a. Prepare the journal entries the investor company should record on March 1, 2019. Note: If a journal entry is not required, select "N/A" as your answers for the drop-down options and leave the Debit and Credit answers blank (zero). Description Debit Equity investment 60,800 x Unrealized holding gain 60,800 X To adjust value of investment account. Equity investment 765,000 0 Cash 0 765,000 To record the purchase of additional stock. Credit 0
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