Equity Method Example 1 Kirby Company purchased 12,500 shares of Nala Company's outstanding common stock on 1/1/3 for $150,000. The investment represents 25% of the voting shares (i.e. significant influence is presumed). The fair values of Nala's depreciable assets are equal to their book values and there are no intercompany transactions. Nala also does not have any extraordinary items or discontinued operations. The following represents Nala's net income and dividends paid in 2013 and 2014. 1. Record the initial purchase of Nala stock. 2. Record all necessary journal entries for 203 through 205. Equity Method Example 2 On 1/1/x1, David Company purchased 12,500 shares of Partner Company's outstanding common stock for $300,000. The investment represents 35% of the voting shares (i.e. significant influence is presumed). On the date of acquisition, the following was known. In 201, Partner earned $144,000 of net income and distributed $100,000 of dividends. There are no intercompany transactions. Partner also does not have any extraordinary items or discontinued operations. 1. Record the initial purchase of Partner stock. 2. Record all necessary journal entries for 201. 3. What is reported on David's B/S \& 1/S on 201