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Determine the December balance of Investment

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Reference no: EM132683695

Problem - Equity Method for Stock Investment

On January 15, 2012, Outdoor Life Inc. purchased 94,500 shares of Escape Tours Inc. directly from one of the founders for a price of $38 per share. Escape Tours has 225,000 shares outstanding, including the Outdoor Life shares. On July 2, 2012, Escape Tours paid $230,000 in total dividends to its shareholders. On December 31, 2012, Escape Tours reported a net income of $695,000 for the year. Outdoor Life uses the equity method in accounting for its investment in Escape Tours.

Required -

a. Provide the Outdoor Life Inc. journal entries for the transactions involving its investment in Escape Tours Inc. during 2012.

b. Determine the December 31, 2012, balance of Investment in Escape Tours Inc. Stock.

Reference no: EM132683695

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