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Problem #4 Comparison of the Fair Value through Net Income and Equity Methods On January 1, 2023, Reddy Company purchased 20 percent (40,000 shares) of
Problem \#4 Comparison of the Fair Value through Net Income and Equity Methods On January 1, 2023, Reddy Company purchased 20 percent (40,000 shares) of Raich Corporation for $280,000. The balance sheet of Raich Corporation on the acquisition contained the following information: Page 2 The assets subject to depreciation have a market value of $540,000. The book values of the other assets and liabilities equal their market values. Both companies have December 31 year-ends. REQUIRED: a) Prepare the required journal entries using the fair value through net income method for the following events: - Acquisition (if applicable, also compute the amount of goodwill acquired) - Net income earned by Raich Corporation during 2023 of $28,000. - Additional depreciation expense - The price of Raich Corporation stock declined to $5 per share at the end of 2023. - A cash dividend of $0.25 per share paid on August 3, 2023 b) Prepare the required journal entries using the equity method for the same events listed above
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