| Equity Investments; Fair Value vs equity method |
| On January 2, 2018, Killeen Nurseries Inc. bought 5% of Creasote's capital stock for $103 million. Creasotes’s net income for the year ended December 31, 2018, was $133 million. The fair value of the shares held by Killeenn was $124 million at December 31, 2018. During 2018, Creasote declared a dividend of $66 million. |
| Required: |
| 1. Prepare all appropriate journal entries related to the investment |
| Event | General Journal | Debit | Credit |
| 1 |
| 2 |
| 3 |
| 4 |
| Assume that Killeen purchased a 20% stake in Bluebonnet inc 420,000 shares for $500,000 at the beginning of the fiscal year of both companies. On the purchase date, the fair value and book value of AMC’s net assets were equal. During the year, AMC earned net income of $270,000 and distributed cash dividends of 25 cents per share. At year-end, the fair value of the shares is $527,000. |
| Event | General Journal | Debit | Credit |
| 1 |
| 2 |
| 3 |
| 4 |
brandon282011
AC216Unit2Assignment4-EquityInvestments.xlsx
