Pat purchased 10 of nellie bell on january 1 2010 for

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Reference no: EM13599995

Pat purchased 10% of Nellie Bell on January 1, 2010 for $400,000 cash and did not have the ability to exercise significant influence. During 2010, Nellie Bell paid $300,000 in dividends and reported income of $500,000. On December 31, 2010, the value of Pat's investment in Nellie Bell fell to $340,000. Then, on January 1, 2011, Pat purchased an additional 20% of Nellie Bell for $700,000 cash and was able to have significant influence. Pat had been using the fair value method considering the securities to be available for sale.

a. Journalize all necessary entries on the books of Pat using the fair value method in 2010.
b. Journalize the conversion to the equity method in 2011.

Reference no: EM13599995

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