On January 1, 2022, Joey Co. acquired 40% of Legoria CO.s voting stock for $20 million cash. Legorias book value on the date of acquisition is $6 million. A valuation analysis reveals that Legorias Patents (10-year life) are undervalued by $2.0 million and it has unreported Technology (5-year life) valued at $3.0 million. Legoria pays dividends of $300,000 and reports net income of $1,700,000 in 2022.

Required:

1) Give the Journal Entries on Joey Cos Books for 2022 related to its Investment in Legoria Co. using the Equity Method.

2) If there was a Differential due to the acquisition of 40% of Legoria Cos stock, how much was allocated to Goodwill.

3) If you were the External Auditor for Joey CO, what would be some indicators that Joey CO has significant influence over Legoria CO. State 2 indicators.

4) Does GAAP allow Joey Co. to record its 40% investment in Legoria Co using another accounting method?

a. Yes or no.

b. If answer to part a is yes, what is that accounting method (provide a summary of it and compare it to the Equity Method)?

c. Based on your discussion in part B, record the Journal entries Joey Co would make if the fair value of its 40% Investment in Legoria Co. is $23 Million at 12/31/2022?