On January 1, 2017, Fisher Corporation purchased 40 percent (72,000 shares) of the common stock of...

60.1K

Verified Solution

Question

Accounting

On January 1, 2017, Fisher Corporation purchased 40 percent(72,000 shares) of the common stock of Bowden, Inc. for $984,000 incash and began to use the equity method for the investment. Theprice paid represented a $54,000 payment in excess of the bookvalue of Fisher's share of Bowden's underlying net assets. Fisherwas willing to make this extra payment because of a recentlydeveloped patent held by Bowden with a 15-year remaining life. Allother assets were considered appropriately valued on Bowden'sbooks.
Bowden declares and pays a $98,000 cash dividend to itsstockholders each year on September 15. Bowden reported net incomeof $410,000 in 2017 and $360,000 in 2018. Each income figure wasearned evenly throughout its respective year.
On July 1, 2018, Fisher sold 10 percent (18,000 shares) ofBowden's outstanding shares for $326,000 in cash. Although it soldthis interest, Fisher maintained the ability to significantlyinfluence Bowden's decision-making process.
Prepare the journal entries for Fisher for the years of 2017 and2018.
record 1/2 year of patentamortization:

Answer & Explanation Solved by verified expert

4.4 Ratings (903 Votes)

Answer Date Accounts title Debit Credit Jan 1 2017 Investment in Bowden Inc 984000 Cash 984000 To record Purchase of Investment Sep 15 2017 Cash 39200 Investment in Bowden Inc 39200 To record Dividend Received 9800040 Dec 31 2017 Investment in Bowden Inc 164000 Income from equity investment 164000 To record Income from Equity See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member