Watson Corporation owns equity-method investments in several companies. Suppose Watson paid $1,200,000 to acquire a 35% investment

Question:

Watson owns equity-method investments in several companies. Suppose Watson paid $1,200,000 to acquire a 35% investment in Smith Software Company. Smith Software reported net income of $650,000 for the first year and declared and paid cash dividends of $440,000.

Requirements
1. Record the following in Watson’s journal:
(a) Purchase of the investment
(b) Watsons proportion of Smith Software’s net income
(c) Receipt of the cash dividends.
2. What is the ending balance in Watsons investment account?

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...