Matrix, Inc. acquired 25% of Neo Enterprises for $2,000,000 on January 1, 2014. The fair value...
Matrix, Inc. acquired 25% of Neo Enterprises for $2,000,000 on January 1, 2014. The fair value and book value of 25% of Neo's identifiable net assets was $2,000,000 and $1,600,000 on that date, and the difference was attributable to assets that would be depreciated over 10 years. During 2014 Neo recognized net income of $500,000 and paid dividends of $400,000. Matrix’s portion of Neo’s fair value was $2,500,000 as of December 31, 2014.
Required: Prepare the journal entries necessary to account for the Neo investment, assuming that Matrix accounts for that investment as (1) an equity method investment, and (2) elects the fair-value option. Show entries for the purchase of the investment, recognition of net income, receipt of dividends, and adjustment at year-end, as appropriate.
| DATE | ACCOUNTS | DEBIT | CREDIT |
| EQUITY METHOD | |||
| FAIR VALUE METHOD | |||
Homework Answers
I think matrix proportion in neo is 25 million. Accordingly I given last entry by considering 25million. Please check question once.
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Matrix, Inc. acquired 25% of Neo Enterprises for $2,000,000 on
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