Question
Entries for equity investments: 20%50% ownership On January 6, 20Y8, Bulldog Co. purchased 25% of the outstanding common stock of $162,000. Gator Co. paid total
Entries for equity investments: 20%50% ownership
On January 6, 20Y8, Bulldog Co. purchased 25% of the outstanding common stock of $162,000. Gator Co. paid total dividends of $19,400 to all shareholders on June 30, 20Y8. Gator had a net loss of $30,800 for 20Y8.
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
__________ __________ __________
__________ __________ __________
June 30 - Dividend __________ __________ __________
__________ __________ __________
Dec. 31 - Equity Loss
__________ __________ __________
__________ __________ __________
b. Compute the balance of Investment in Gator Co. Stock on December 31, 20Y8. ____________
c. How does valuing an investment under the equity method differ from valuing an investment at fair value?
Under the _______ 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 ________ method uses market price information to value the investment in the investee.
__________ __________ __________
__________ __________ __________
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