Question
Meyer Jewelers purchased 3,000,000 of the outstanding 10,000,000 shares of Angel & Associates. Meyer has significant influence over Angel, so Meyer will account for this
Meyer Jewelers purchased 3,000,000 of the outstanding 10,000,000 shares of Angel & Associates. Meyer has significant influence over Angel, so Meyer will account for this investment using the equity method. On the purchase date, Angel had net assets with a book value of $7,300,000 and a fair value of $8,000,000. The difference in fair value is a result of the higher fair value of equipment than it's book value. The remaining useful life of this equipment is 25 years. Assuming this investment was purchased on 1/1, which of the following is the correct journal entry to record the difference in net assets for this investment on 12/31?
A. Depreciation Expense 28,000
Accumulated Depreciation minus Investment Assets 28,000
B. Income from Investment 8,400
Investment in Angel & Associates 8,400
C. Investment in Angel & Associates 8,400
Income from Investment 8,400
D. Depreciation Expense 28,000
Investment in Angel & Associates 28,000
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