Question

On January 1, 2017, Fisher Corporation purchased 40 percent (86,000 shares) of the common stock of Bowden, Inc. for $974,000 in cash and began to use the equity method for the investment. The price paid represented a $60,000 payment in excess of the book value of Fisher's share of Bowden's underlying net assets. Fisher was willing to make this extra payment because of a recently developed patent held by Bowden with a 15-year remaining life. All other assets were considered appropriately valued on Bowden's books.

Bowden declares and pays a $108,000 cash dividend to its stockholders each year on September 15. Bowden reported net income of $380,000 in 2017 and $340,000 in 2018. Each income figure was earned evenly throughout its respective year.

On July 1, 2018, Fisher sold 10 percent (21,500 shares) of Bowden's outstanding shares for $338,000 in cash. Although it sold this interest, Fisher maintained the ability to significantly influence Bowden's decision-making process.

Prepare the journal entries for Fisher for the years of 2017 and 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations. Round your final answers to the nearest whole dollar.)

TRANSACTION LIST

• 1

  Record cost of 86,000 shares of Bowden Company.

• 2

  Record the annual dividend declared and received from Bowden.

• 3

  Record accrue 2017 income based on 40% ownership of Bowden.

• 4

  Record amortization of $60,000 excess patent fair value [indicated in problem] over 15 years.

• 5

  Record the entry to accrue ½ year income of 40% ownership.

• 6

  Record ½ year amortization of patent to establish correct book value for investment as of 7/1/18.

• 7

  Record 21,500 shares of Bowden Company sold; investment basis computed below.

• 8

  Record annual dividend declared and received.

• 9

  Record ½ year income based on remaining 30% ownership.

• 10

  Record ½ year of patent amortization.

Answer 1

od Credit Debit 974000 Journal Entries - Particulars 1. Investment in Bowden inc - To Cash sha t Being amount paid to acquire - you in bowden has been recorded 974000 at 2. for dividend declared a * Dividend receivable Ale 43200 ($108000 x0.40) To investment in Bowdenale 43200 * Cash Alc Co To dividend income Being dividend received ) 43200 hiver 43200 Inut 3. Jo record the Amortization Pense from Bowden Ine 152000 To income frow bowden 1,52000 4. To record the excess amortisation amt Income To from Bowden Ale inut in Bowden b 4000 Inc 4000 5. To record the half year income. Investment in Bowden ale To income from Bowden 68000 68000

the amortization excess ant for 6. To record to half year Income from Bowden Ale et dooo To investment in Bowden Inedy) apov f 7. To record the sale of shares Cash - Alc Dr To investment inci To profit on eale of 338000 ob k 286200 inut 51800 8. for dividend dedared Dividend receivable Ale boubit 32400 To inut in Bowden Ale ruik solo (108000 x 30%) S2000 a. To record the income how Bowden Investment from bowdentle 7000 To income from Bowden ($3,40,000 X Y * 30%) To record the amortization excess ant 5 1000 to. Income from Bowden ale 1500 To investment in Rowden a PUDOO X 0.75 X0:50) 1500 7

I WIN Investment on july pt 2017 40% purchase Income earned, 2017 - Dividend 6) Amortization 9,44,000 1,52000 (43200) (4000) Jan 1st 2018 (4) 0 Balance on Income earned Amortisation 10,78,800 68,000 (20002 Balance on July 4, 2018 A1,44,800 86000 shales - 21500 shares 1144800 ? 1144800 X 21500 860vo > 286200