How to account all necessary journal entries in 20X1 for Doberdor to account for its investment in the Boxerdoodle shares? (Equity Method)

Doberdor International, Inc. (Doberdor) is a large multinational company listed on the TSX. On January 1, 20X1, Doberdor acquired in the open market 64,000 common shares of Boxerdoodle Corporation (Boxerdoodle) at a cost of $19.875 per share paying in cash a total purchase price of

$1,272,000. This investment gives management of Doberdor significant influence, but not control and not joint control, over the financial and operating policy decisions of Boxerdoodle.

The following tables show the information that you have collected from the audited financial statements of Boxerdoodle for the one year after the January 1, 20X1 acquisition date:

Balance Sheet January 1, 20X1 December 31, 20X1

Assets:

Current assets $1,170,000 $1,230,000

Land 2,450,000 2,190,000

Equipment (net) 3,110,000 3,730,000

Total $6,730,000 $7,150,000

Liabilities and Equities

Current liabilities $ 900,000 $1,100,000

Non-current liabilities 2,900,000 2,710,000

Common Shares (200,000 shares) 1,000,000 1,000,000

Retained Earnings 1,120,000 1,760,000

Accumulated Other Comprehensive Income 810,000 580,000

Total $6,730,000 $7,150,000

Statement of Income and Comprehensive Income

Year ended December 31, 20X1

Revenue $1,880,000

Expenses 1,270,000

Income (Loss) from Continuing Operations $ 610,000

Income (Loss) from Discontinued Operations 180,000

Net Income (Loss) $ 790,000

Other Comprehensive Income (Loss) (230,000)

Total Comprehensive Income (Loss) $ 560,000

Statement of Changes in Equity

Retained Earnings, Beginning balance $1,120,000

Net Income (Loss) 790,000

Dividends (150,000)

Retained Earnings, Ending balance $1,760,000

Accumulated Other Comprehensive Income, Beginning balance $ 810,000

Other Comprehensive Income (Loss) (230,000)

Accumulated Other Comprehensive Income, Ending balance $ 580,000

The following table shows the information you collected on the fair market values of all the identifiable assets and liabilities of Boxerdoodle as of two specific dates:

Fair Market Value January 1, 20X1 December 31, 20X1

Current assets $1,170,000 $1,230,000

Land 3,800,000 4,100,000

Equipment 3,710,000 3,930,000

Current liabilities (900,000) (1,100,000)

Non-current liabilities (2,900,000) (2,710,000)

Total $4,880,000 $5,450,000

You have also collected the following additional information:

1.All land on hand with the net book value of $2,450,000 at January 1, 20X1 on the books of Boxerdoodle remained on hand and held by Boxerdoodle at December 31, 20X1.

2.All equipment on hand with the net book value of $3,110,000 at January 1, 20X1 on the books of Boxerdoodle had an estimated remaining useful life of 10 years as of January 1, 20X1 with estimated zero residual value. Boxerdoodle and Doberdor both use the straight-line depreciation method in the accounting of all their property, plant, and equipment assets.

2.The present value of the future cash flows expected to arise from dividends to be received from Boxerdoodle and from the ultimate disposal of the Boxerdoodle shares, on a per share basis, was estimated by management of Doberdor on December 31, 20X1 to be $29.00.

3.The common shares of Boxerdoodle were trading on the TSX at $28.125 on December 31, 20X1.

4.The dividends payable account on the books of Boxerdoodle had a zero balance at December 31, 20X1.

5.Both companies, Doberdor and Boxerdoodle, have a December 31 year end.