Cost method to the equity method for the original investment

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Reference no: EM131221084

Assume that an investor has accounted for a $320,000 cost, 8% investment in the investee using the fair value method (available-for-sale designation). The following additional information is available: Cumulative Dividends Received from Investee 8% of the Cumulative Profits Recorded by Investee Cumulative Fair Value Adjustment for 8% Interest $37,500 $98,300 $117,600 Now, assume that the investor acquires an additional 17% interest in the investee (bringing the total to 25%) and concludes that it can now exert significant influence over the investee. Required a. Provide the required journal entries to account for the change from the fair value method to the equity method for the original investment. General Journal Description

b. Now, assume that the investor has accounted for its investment using the cost method. Provide the required journal entries to account for the change from the cost method to the equity method for the original investment. General Journal

Reference no: EM131221084

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