Record the initial purchase by Model Corp

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Question - On January 1, 2021, Model Corp. invested $810,500 in Diamond Inc. for 25% of its outstanding shares. Diamond shares are not traded in an active market. At the time of purchase, Diamond reported assets of $4,660,000 and liabilities of $2,620,000. Asset values reflected fair market value except for capital assets that had a net book value of $2,125,000 and a fair market value of $2,395,000. These assets had a remaining life of 10 years. Diamond paid total dividends of $150,000 and reported net income of $380,000 for 2021.

Required -

(a) Record the initial purchase by Model Corp.

(b) Record the entries related to the investment in Diamond Inc. for year one on Model Corp.'s books.

Reference no: EM133095087

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