Question

-ms Problem 1-31 (LO 1-1, 1-2, 1-3, 1-4, 1-5d) On January 1, 2017, Fisher Corporation purchased 40 percent (74.000 shares) of the common stock of Bowden, Inc. for $976,000 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 $96,000 cash dividend to its stockholders each year on September 15. Bowden reported net income $394.000 in 2017 and $348,000 in 2018. Each income fiqure was earned evenly throughout its respective year On July 1, 2018, Fisher sold 10 percent (18,500 shares) of Bowden's outstanding shares for $328,000 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 neares whole dollar.) View transaction list Journal entry worksheet < © O O O O O O O > Record cost of 74,000 shares of Bowden Company.

Answer 1

1-31 Joumal entries as follows: / Credit | Trn. 1 Debit $976,000 Account Title Investment in Bowden Inc. Cash (To record Investment purchase) $976,000 $38.400 Dividend receivable ($96,000 x 40%) Investment in Bowden (To record dividend declared from Bowden Inc.) $38.400 $38.400 Cash Dividend Income (To record receipt of dividend) $38.400 3 $157,600 Investment in Bowden Inc Income from Bowden ($394,000 x 40%) (To record the income from Bowden) $157,600 4 $4.000 Income from Bowden Inc. Investment in Bowden Inc. ($60,000/15 years) (To record amortization excess amount) $4.000

5 $69.600 Investment in Bowden Inc. Income from Bowden [$348,000 x 40% To record the half year income) 50%] $69,600 6 $2.000 Income from Bowden Investment in Bowden Inc. ($4.000/2) (to record the Amortization excess amount for half year) $2.000 7 $328,000 Cash Investment (See working) Gain on sale of investment (To record the sale of 10% in Bowden Inc.) $289.700 $38,300 8 $28.800 Dividend receivable ($96.000 ~ 30%) Investment in Bowden (to record dividend declared from Bowden Inc.) | $28.800 Cash $28.800 $28.800 Dividend Income (To record dividend received from Bowden Inc.)

$52,200 $52.200 Investment in Bowden Inc. Income from Bowden ($348.000 x 50% x 30%] |(To record half year income based on remaining 30% ownership) 10 $1.500 Income from Bowden Inc. Investment in Bowden Inc. (S4000*0.75*0.5) $1,500 Working as follows: Investment value on July 01, 2018 Purchase Add: Income Earned in 2017 Less: Dividend received in 2017 Less: Amortization $976.000 $157,600 (S38,400) ($4,000) Balance on Jan 01, 2018 Add: Income Earned in 2018 (half year) Less: Amortization (half year) $1,091,200 $69,600 ($2,000) Balance on July 01, 2018 $1,158,800 $289,700 Investment value for 10 percent (18,500 shares) ($1,158,800 x 10/40)