Question
Shawn Enterprises purchased 400,000 of the 1,000,000 outstanding shares of Carly Casualties for $4,600,000 on 1/1/19 acquiring significant influence, but not control of, Carly. On
Shawn Enterprises purchased 400,000 of the 1,000,000 outstanding shares of Carly Casualties for $4,600,000 on 1/1/19 acquiring significant influence, but not control of, Carly. On the date of the investment, Carly had net assets with a book value of $9,500,000 and fair value of $10,000,000. This difference is the result of equipment (remaining 10 year life) with a higher fair value than book value. During the year, Carly declared total dividends of $125,000 and reported Net Income of $1,300,000. At the end of the year, the fair value of Shawn's investment in Carly is $5,300,000. For parts (A) through (C), assume Shawn uses the equity method to account for the Carly investment: A. In your supporting documentation, show all of the necessary journal entires for Shawn to record his investment in Carly assuming Shawn uses the equity method. (No entry for part A in Canvas.) B. What is the net impact of the Carly investment on Shawn's 2019 year-end income statement? $ C. What is the ending balance of the Carly investment on Shawn's 2019 year-end balance sheet? $ D. If Shawn had chosen the Fair Value method to account for the Carly investment, what amount of net income would have reported on Shawn's 2019 income statement? $ *You are not required to show all of your journal entries for part D in your supporting documentation. Just show me in some way how you arrived at your answer.
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