Reference no: EM131129669
Allerton Co. acquired 15% of Jenson Corporation on January 1, 2014, for $126,000 when the book value of Jenson's net assets was $720,000; Jenson accounted for this initial investment using the cost method. During 2014, Jenson reported net income of $180,000 and paid dividends of $60,000. On January 1, 2015, Allerton Co. purchased an additional 25% of Jenson for $240,000. Any excess of cost over book value was attributable to goodwill (No amortization). On that same date, Allerton Co. changed to the equity method. During 2015, Jenson reported net income of $240,000 and paid dividends of $90,000. Instructions:
PLEASE SHOW CALCULATIONS
a. What income did Allerton record from Jenson in 2014?
b. What income did Allerton record from Jenson in 2015?
c. Record the journal entry to recognize the conversion to the equity method?
d. Using a well-labeled T-account, what is the balance in Equity Investment at December 31, 2015?
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