Entries for equity investments: 20%50% ownership

On January 6, 20Y8, Bulldog Co. purchased 29% of the outstanding common stock of $164,000. Gator Co. paid total dividends of $21,300 to all shareholders on June 30, 20Y8. Gator had a net loss of $32,800 for 20Y8.

Question Content Area

a. Journalize Bulldog's purchase of the stock, receipt of the dividends, and the adjusting entry for the equity loss in Gator Co. stock.

Jan. 6 - Purchase	CashDividend RevenueInvestment in Gator Co. StockLoss on Gator Co. StockNotes Receivable	- Select -	- Select -
	CashDividend RevenueInvestment in Gator Co. StockLoss on Gator Co. StockNotes Receivable	- Select -	- Select -
June 30 - Dividend	CashDividend RevenueInvestment in Gator Co. StockLoss on Gator Co. StockNotes Receivable	- Select -	- Select -
	CashDividend RevenueInvestment in Gator Co. StockLoss on Gator Co. StockNotes Receivable	- Select -	- Select -
Dec. 31 - Equity Loss	CashDividend RevenueInvestment in Gator Co. StockLoss of Gator Co.Notes Receivable	- Select -	- Select -
	CashDividend RevenueInvestment in Gator Co. StockLoss on Gator Co. StockNotes Receivable	- Select -	- Select -

Question Content Area

b. Compute the balance of Investment in Gator Co. Stock on December 31, 20Y8. $fill in the blank d18bb20cb036022_1

c. How does valuing an investment under the equity method differ from valuing an investment at fair value?

Under the

equityfair value

method, the investor will record their proportionate share of the net increase (or decrease) of the book value of the investee resulting from earnings and dividend distributions. The

equityfair value

method uses market price information to value the investment in the investee.