On 1 January 20X5, Zan Company purchased 4,500 of the 18,000 outstanding common shares of Woo Computer Corp. (WC) for $163,000 cash. Zan had significant influence as a result of the investment and will use the equity method to account for the investment. On 1 January 20X5, the statement of financial position of WC showed the following book values (summarized): Assets not subject to depreciation $ 204,100 * Assets subject to depreciation (net) 163,000 ** Liabilities 54,100 Common shares 243,600 Retained earnings 67,800 *Fair value, $231,500; difference relates to land. **Fair value, $190,400, estimated remaining life, 5 years. Assume there is no impairment of goodwill. Additional subsequent data on WC are as follows: 20X5 20X6 Earnings $ 54,100 $ 80,100 Cash dividends declared and paid 42,100 68,100 Fair value per share $ 22 $ 44 Required: 1-1. Provide the investors entries or give the required information for: (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Required: a. Entry at the date of acquisition. b. Record the Investment revenue for 20X5.c. Entries at 31 December 20X5 to recognize investment revenue and dividends. d. Entries at 31 December 20X6 to recognize investment revenue and dividends.

Journal Entry Worksheet

a. record acquisition of investment

b. Record the Investment revenue for 20X5.

c.Record the dividends received for 20X5.

d. Record the Investment revenue for 20X6

e. Record the dividends received for 20X6.

1-2.Indicate the amount of goodwill purchased.

1-2. Indicate the amount of goodwill purchased.

2. Are any entries needed to recognize a writedown to fair value at the end of 20X5 or 20X6?

multiple choice

• Yes

• No

3. Reconstruct the investment account, showing the opening and closing balances and all changes in the account.

Investment Account (Equity Method)
Acq.
Bal.