Accounting for the Equity Investment When Price Exceeds Book Value Assume an investor purchases all of the stock of the investee in a stock purchase for $2,700. The investee's balance sheet on the date of purchase is as follows: $225 Accounts receivable $225 Mortgage payable Inventories Building Total assets a. 450 In this example, the amount paid (i.e., $2,700) is $450 greater than the book value of the net assets of the investee (i.e., $2,250). Assume the additional $450 of purchase price relates to an unrecognized patent held by the investee that has a remaining useful life of 10 years on the acquisition date. We also assume, subsequent to the purchase, the investee reports net income of $450 and pays $135 in dividends to the investor. Required a. Provide the journal entry to recognize the Equity Income by the investor. b. Provide the journal entry to record the receipt of the clividend. c. Provide the journal entry to record the amortization of the patent asset. C 1800 Stockholders' equity 2250 $2,475 Total liabilities and equicy $2,475 to record equity income) (to record the receipt of dividends) to record the amortization of the patentl Debit Credit

Accounting for the Equity Investment When Price Exceeds Book Value Assume an investor purchases all of the stock of the investee in a stock purchase for $2,700. The investee's balance sheet on the date of purchase is as follows: $225 Accounts receivable $225 Mortgage payable Inventories Building Total assets a. 450 In this example, the amount paid (i.e., $2,700) is $450 greater than the book value of the net assets of the investee (i.e., $2,250). Assume the additional $450 of purchase price relates to an unrecognized patent held by the investee that has a remaining useful life of 10 years on the acquisition date. We also assume, subsequent to the purchase, the investee reports net income of $450 and pays $135 in dividends to the investor. Required a. Provide the journal entry to recognize the Equity Income by the investor. b. Provide the journal entry to record the receipt of the clividend. c. Provide the journal entry to record the amortization of the patent asset. C 1800 Stockholders' equity 2250 $2,475 Total liabilities and equicy $2,475 to record equity income) (to record the receipt of dividends) to record the amortization of the patentl Debit Credit

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter13: Investments And Long-term Receivables

Section: Chapter Questions

Problem 15P: Investments in Equity Securities Manson Incorporated reported investments in equity securities of...

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