On 1 January 20X5, Zan Company purchased 7,250 of the 29,000 outstanding common shares of Woo Computer Corp. (WC) for $191,000 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	$	238,900	*
Assets subject to depreciation (net)		191,000	**
Liabilities		63,500
Common shares		285,800
Retained earnings		79,300

*Fair value, $270,900; difference relates to land. **Fair value, $223,000, estimated remaining life, 5 years. Assume there is no impairment of goodwill. Additional subsequent data on WC are as follows:

		20X5			20X6
Earnings	$	63,500		$	85,500
Cash dividends declared and paid		55,500			75,500
Fair value per share	$	25		$	50

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.) a. Entry at date of acquisition. c. Entries at 31 December 20X5 to recognize investment revenue and dividends. d. Entries at 31 December 20X6 to recognize investment revenue and dividends.

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.

4-1. How much investment revenue would be reported each year if the cost method was used?

4-2. What would be the balance in the investment account?