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 $1,800. The investee's balance sheet on the date of purchase is as follows: Accounts receivable $150 Mortgage payable $150 300 1500 1200 Stockholders equity $1.650 Tocal liabilities and equity $1.650 Building Talasses In this example, the amount paid (ie, $1,800) is $300 greater than the book value of the net assets of the investee (le, $1,500). Assume the additional $300 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 purcha investee reports net income of $300 and pays $90 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 dividend. c. Provide the journal entry to record the amortization of the patent asset. C ered the receipt of dividends) 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 $1,800. The investee's balance sheet on the date of purchase is as follows: Accounts receivable $150 Mortgage payable $150 300 1500 1200 Stockholders equity $1.650 Tocal liabilities and equity $1.650 Building Talasses In this example, the amount paid (ie, $1,800) is $300 greater than the book value of the net assets of the investee (le, $1,500). Assume the additional $300 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 purcha investee reports net income of $300 and pays $90 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 dividend. c. Provide the journal entry to record the amortization of the patent asset. C ered the receipt of dividends) 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...
Related questions
Question
Expert Solution
Step 1: Introduction
Using the journalizing technique in accounting, all business transactions are recorded in the financial records. The original record of a business transaction is kept in a journal, commonly referred to as a book of original entries. Every business transaction is entered into the journal and is kept in chronological order as it happens.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
Financial Reporting, Financial Statement Analysis…
Finance
ISBN:
9781285190907
Author:
James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:
Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
Financial Reporting, Financial Statement Analysis…
Finance
ISBN:
9781285190907
Author:
James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:
Cengage Learning