Question

Assessing Financial Statement Effects of Equity Method Securities Use the financial statement effects template to record the following transactions involving investments in marketable securities accounted for using the equity method. a. Purchased 12,000 common shares of Bakersfield Co. at $12 per share; the shares represent 30% ownership in Bakersfield. b. Received a cash dividend of $2.00 per common share from Bakersfield. c. Bakersfield reported annual net income of $123,000. d. Sold all 12,000 common shares of Bakersfield for $159,000. Use negative signs with answers, if appropriate. Balance Sheet Income Statement Noncash Assets Contrib. Captial Earned Capital Cash Asset + Liabilities + + Revenues. Expenses : Net income Transaction a. Purchased shares of Bakersfield. b. Received cash dividend from Bakersfield. c. Bakersfield reported annual net income. d. Sold all Bakersfield shares.

Answer 1

	Journals	Cash	Noncash	Liabilities +	Contributed	Earned	Revenues -	Expenses=	Net Income
		Assets +	Assets =		Capital	Capital
a	Purchase common shares	($144,000)	$144,000
	of Bakersfield Co.
b	Received cash Dividend	$24,000				$24,000	$24,000		$24,000
	$2.00 per common share from
	Bakersfield Co.
c	Bakersfield Co. reported		$36,900			$36,900	$36,900		$36,900
	net income of $123,000
d	Sold 12,000 common shares	$159,000	($156,900)			$2,100	$2,100		$2,100
	of Bakersfield