On January 6, 2016, Bulldog Co purchased 37 of the outstanding stock of Gator Co for $228,000 Gator Co paid total dividends of $24,600 to all shareholders on June 30 Gator had a net loss of $51,400 for 2016 Required A Journalize Bulldogs purchase of the stock, receipt of the dividends, and the adjusting entry for the equity loss in Gator Co stock Refer to the Chart of Accounts for exact wording of account titles B Compute the balance of Investment in Gator Co Stock on December 31, 2016 C How does valuing an investment under the equity method differ from valuing an investment at fair value Chart of Accounts CHART OF ACCOUNTS Bulldog Co General Ledger ASSETS 110 Cash 111 Petty Cash 120 Accounts Receivable 121 Allowance for Doubtful Accounts 131 Notes Receivable 132 Interest Receivable 141 Merchandise Inventory 145 Office Supplies 146 Store Supplies 151 Prepaid Insurance 161 Investment in Gator Co Stock 165 Valuation Allowance for Trading Investments 166 Valuation Allowance for Available for Sale Investments 181 Land 191 Store Equipment 192 Accumulated Depreciation Store Equipment 193 Office Equipment 194 Accumulated Depreciation Office Equipment LIABILITIES 210 Accounts Payable 221 Notes Payable 231 Interest Payable 241 Salaries Payable 251 Sales Tax Payable EQUITY 311 Common Stock 312 Paid In Capital in Excess of Par Common Stock 321 Preferred Stock 322 Paid In Capital in Excess of Par Preferred Stock 331 Treasury Stock 332 Paid In Capital from Sale of Treasury Stock 340 Retained Earnings 350 Unrealized Gain (Loss) on Available for Sale Investments 351 Cash Dividends 352 Stock Dividends 390 Income Summary REVENUE 410 Sales 611 Interest Revenue 612 Dividend Revenue 621 Income of Gator Co 631 Gain on Sale of Investments 641 Unrealized Gain on Trading Investments EXPENSES 511 Cost of Merchandise Sold 512 Bad Debt Expense 515 Credit Card Expense 516 Cash Short and Over 520 Salaries Expense 531 Advertising Expense 532 Delivery Expense 533 Repairs Expense 534 Selling Expenses 535 Rent Expense 536 Insurance Expense 537 Office Supplies Expense 538 Store Supplies Expense 561 Depreciation Expense Store Equipment 562 Depreciation Expense Office Equipment 590 Miscellaneous Expense 710 Interest Expense 721 Loss of Gator Co 731 Loss on Sale of Investments 741 Unrealized Loss on Trading Investments Journal a Journalize Bulldogs purchase of the stock, receipt of the dividends, and the adjusting entry for the equity loss in Gator Co stock Refer to the Chart of Accounts for exact wording of account titles PAGE 10 JOURNAL DATE DESCRIPTION POST REF DEBIT CREDIT 1 2 3 4 5 Adjusting Entries 6 7 Final Questions B Compute the balance of Investment in Gator Co Stock on December 31, 2016 C How does valuing an investment under the equity method differ from valuing an investment at fair value Under the equity method, the investor will record their proportionate share of the net increase (or decrease) of the book value of the investee resulting from The fair value method uses to value the investment in the investee These two methods result in different valuations because the equity method is based upon , while the fair value approach uses The two methods related to each other over time While changes in book value can influence market prices, many other variables can influence the market price of a stock

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On January 6, 2016, Bulldog Co. purchased 37% of the outstanding stock of Gator Co. for $228,000. Gator Co. paid total dividends of $24,600 to

On January 6, 2016, Bulldog Co. purchased 37% of the outstanding stock of Gator Co. for $228,000. Gator Co. paid total dividends of $24,600 to all shareholders on June 30. Gator had a net loss of $51,400 for 2016.

Required:

A.	Journalize Bulldogs purchase of the stock, receipt of the dividends, and the adjusting entry for the equity loss in Gator Co. stock. Refer to the Chart of Accounts for exact wording of account titles.
B.	Compute the balance of Investment in Gator Co. Stock on December 31, 2016.
C.	How does valuing an investment under the equity method differ from valuing an investment at fair value?

Chart of Accounts

CHART OF ACCOUNTS

Bulldog Co.

General Ledger

	ASSETS
110	Cash
111	Petty Cash
120	Accounts Receivable
121	Allowance for Doubtful Accounts
131	Notes Receivable
132	Interest Receivable
141	Merchandise Inventory
145	Office Supplies
146	Store Supplies
151	Prepaid Insurance
161	Investment in Gator Co. Stock
165	Valuation Allowance for Trading Investments
166	Valuation Allowance for Available-for-Sale Investments
181	Land
191	Store Equipment
192	Accumulated Depreciation-Store Equipment
193	Office Equipment
194	Accumulated Depreciation-Office Equipment

	LIABILITIES
210	Accounts Payable
221	Notes Payable
231	Interest Payable
241	Salaries Payable
251	Sales Tax Payable

	EQUITY
311	Common Stock
312	Paid-In Capital in Excess of Par-Common Stock
321	Preferred Stock
322	Paid-In Capital in Excess of Par-Preferred Stock
331	Treasury Stock
332	Paid-In Capital from Sale of Treasury Stock
340	Retained Earnings
350	Unrealized Gain (Loss) on Available-for-Sale Investments
351	Cash Dividends
352	Stock Dividends
390	Income Summary

	REVENUE
410	Sales
611	Interest Revenue
612	Dividend Revenue
621	Income of Gator Co.
631	Gain on Sale of Investments
641	Unrealized Gain on Trading Investments

	EXPENSES
511	Cost of Merchandise Sold
512	Bad Debt Expense
515	Credit Card Expense
516	Cash Short and Over
520	Salaries Expense
531	Advertising Expense
532	Delivery Expense
533	Repairs Expense
534	Selling Expenses
535	Rent Expense
536	Insurance Expense
537	Office Supplies Expense
538	Store Supplies Expense
561	Depreciation Expense-Store Equipment
562	Depreciation Expense-Office Equipment
590	Miscellaneous Expense
710	Interest Expense
721	Loss of Gator Co.
731	Loss on Sale of Investments
741	Unrealized Loss on Trading Investments

Journal

a. Journalize Bulldogs purchase of the stock, receipt of the dividends, and the adjusting entry for the equity loss in Gator Co. stock. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 10

JOURNAL

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1
2
3
4
5		Adjusting Entries
6
7

Final Questions

B. Compute the balance of Investment in Gator Co. Stock on December 31, 2016.

C. How does valuing an investment under the equity method differ from valuing an investment at fair value?

Under the equity method, the investor will record their proportionate share of the net increase (or decrease) of the book value of the investee resulting from . The fair value method uses to value the investment in the investee. These two methods result in different valuations because the equity method is based upon , while the fair value approach uses . The two methods related to each other over time. While changes in book value can influence market prices, many other variables can influence the market price of a stock.