Journal Entries - Equity Method Of Accounting
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On January 1, 2009, Frederich Corporation purchased 7,500 shared of SportTech, Inc. as a Long-term investment for a total of $235,000.The 7,500 shares represent 30% of the outstanding (25,000) shares of SportTech. Prepare the journal entries for Frederich to record the following transactions and events:
December 31, 2009: SportTech reported net income of $66,000 for 2009.
February 1, 2010: Sold 1,875 of the SportTech shares for $34 per share. In addition, $1,350 in fees and commissions were paid by Frederich on this sale.
November 1, 2010: Frederich received a $0.90 per share cash dividend from SportTech.
December 31, 2010: SportTech reported net loss of $46,000 for 2010.
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Solution Summary
The solution provides journal entries for equity method of accounting related to an associate company.
Solution Preview
30% ownership means Frederich may have significant influence,hence equity method of accounting will be applied.
31 Dec 09 Debit Long-term Investment - 19,800
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