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Determine the carrying value of the investment

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Question - Chad acquired 65,000 of the 162,500 voting common share shares outstanding at an acquisition cost of $250,000. On that date, Jeremy's balance sheet disclosed net assets of $430,000. During 2022, Jeremy reported net income of $100,000 and paid cash dividends of $30,000. Any excess cost over fair value is attributable to an unamortized trademark with a 20-year remaining life. Jeremy's shares were selling for $5 per share on December 31, 2022.

Required -

1. Prepare Chad's journal entries for 2022 to apply the equity method to this investment.

2. Determine the carrying value of the investment under the equity method at December 31, 2022.

3. Prepare Chad's journal entries for 2022 if this investment was accounted for as a passive investment for financial reporting purposes (i.e., the equity method could not be used).

Reference no: EM132525297

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